<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 31, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CATALYTICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 94-2262240
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION)
430 FERGUSON DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
PHONE (415) 960-3000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------
RICARDO B. LEVY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CATALYTICA, INC.
430 FERGUSON DRIVE
MOUNTAIN VIEW, CALIFORNIA 94043
(415) 960-3000
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
BARRY E. TAYLOR, ESQ.
DONNA M. PETKANICS, ESQ.
ARMANDO CASTRO, ESQ.
KEVIN M. GALLIGAN, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(415) 493-9300
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SECURITY(1) OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Warrants............... 6,635,263 $0 $0 $0
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Common Stock, $0.001 par
value Underlying War-
rants................. 6,635,263 $4.00 $26,541,052 $8,043
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 under the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two prospectuses:
(1) the "Primary Prospectus" covering the offering of the Warrants by the
Registrant.
(2) the "Warrant Exercise Prospectus" covering the issuance of Common
Stock upon the exercise of the Warrants being offered hereby.
The Warrant Exercise Prospectus is identical to the Primary Prospectus
except for the following sections: the Outside Front Cover page and the
Outside Back Cover page, copies of which are attached to this Registration
Statement as pages A-1 and A-2, respectively. A current copy of the Warrant
Exercise Prospectus may be obtained from the Company's transfer agent upon
delivery of the Warrant Exercise Notice.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 31, 1997
CATALYTICA, INC.
COMMON STOCK PURCHASE WARRANTS
EXPIRING , 1997
Catalytica, Inc. (the "Company") will issue at no cost to holders of record
of its common stock, par value $0.001 per share (the "Common Stock"), on ,
1997 (the "Record Date"), one Common Stock Purchase Warrant (a "Warrant") for
each three shares of Common Stock held on the Record Date. No fractional
Warrants will be issued and accordingly the number of Warrants to be issued to
each holder will be rounded down to the nearest whole Warrant. Each Warrant
entitles the holder to purchase, at any time prior to 5:00 p.m. (Pacific time)
on , 1997 (the "Warrant Expiration Date"), one share of Common Stock at an
exercise price of $4.00 per share (the "Warrant Price"). The issuance of the
Warrants is referred to herein as the "Warrant Issuance."
The Common Stock of the Company is traded on The Nasdaq National Market under
the symbol "CTAL." On , 1997, the last reported sale price of the Company's
Common Stock on The Nasdaq National Market was $ per share. See "Price
Range of Common Stock." Prior to this Offering there has been no public market
for the Warrants of the Company. Application has been made to have the Warrants
approved for quotation on The Nasdaq National Market under the symbol "CTALW."
See "The Warrant Issuance."
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A PURCHASE OF THE COMMON STOCK ISSUABLE UPON EXERCISE OF THE WARRANTS
INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
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UNDERWRITING
WARRANT DISCOUNTS AND PROCEEDS TO
EXERCISE PRICE COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Warrant.......................... $4.00 none $4.00
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Total (3)............................ $26,541,052 none $26,541,052
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</TABLE>
(1) The Warrants are being issued directly by the Company, and no commissions
or other remuneration is intended to be paid to any person for soliciting
purchases of the shares of Common Stock underlying the Warrants.
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) Assumes exercise of all Warrants to be issued hereby.
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The date of this Prospectus is , 1997
<PAGE>
A Warrant Certificate evidencing the total number of shares of Common Stock
a stockholder is entitled to purchase is being sent with this Prospectus to
each stockholder entitled to participate in this Warrant Issuance.
To the extent a stockholder does not exercise his Warrants, his percentage
equity interest in the Company and his voting power will be reduced. See "The
Warrant Issuance--Summary of Anticipated Effects of the Warrant Issuance;
Dilution."
The Warrants may not be exercised or sold by any person, and neither this
Prospectus nor any Warrant shall constitute an offer to sell or a solicitation
of an offer to purchase any shares of Common Stock, in any jurisdiction in
which such transactions would be unlawful. See "The Warrant Issuance--State
and Foreign Securities Laws."
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities of the Commission located at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at Seven World Trade Center, 13th Floor, New
York, New York 10048, and Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The Common Stock of
the Company is quoted on the Nasdaq National Market and reports, proxy
statements and other information concerning the Company may also be inspected
at the offices of the National Association of Securities Dealers, 1735 K
Street, N.W., Washington, D.C. 20006.
Additional information regarding the Company and the shares offered hereby
is contained in the Registration Statement on Form S-3 and the exhibits
thereto filed with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). For further information pertaining to the Company, the
Warrants and the Common Stock, reference is made to the Registration Statement
and the exhibits thereto, which may be inspected without charge at, and copies
thereof may be obtained at prescribed rates from, the office of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission maintains a World Wide Web site that contains reports, proxy
and information statements and other information regarding registrants that
file electronically with the Commission. The address of the site is
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed with the Commission and are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996 filed with the Commission on April 28, 1997.
2. The Company's Quarterly Report on Form 10-Q/A for the quarterly period
ended March 31, 1997 filed on June 4, 1997.
3. The Company's Proxy Statement dated July 16, 1997 in connection with the
1997 Annual Meeting of Stockholders filed on July 18, 1997.
2
<PAGE>
4. Description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A filed on December 11, 1992, as amended
November 19, 1996 and July 29, 1997.
5. Description of the Company's Preferred Share Purchase Rights contained in
the Company's Registration on Form 8-A filed with the Commission on July
29, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering made by this Prospectus shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein, or in any other subsequently filed document which also is or is deemed
to be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, on written or oral request of such person, a copy of
any or all documents incorporated by reference in this Prospectus, without
exhibits to such documents (unless such exhibits are specifically incorporated
by reference into such documents). Copies of this Prospectus, as amended or
supplemented from time to time, and any other documents (or parts of
documents) that constitute part of the Prospectus under Section 10(a) of the
Securities Act will also be provided without charge to each such person, upon
written or oral request. Requests should be directed to Manager, Corporate
Marketing and Communications, Catalytica, Inc., 430 Ferguson Drive, Mountain
View, California 94043, telephone number (408) 960-3000.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and the related notes thereto
appearing elsewhere in this Prospectus. See "Risk Factors" for information that
should be considered by prospective investors.
THE COMPANY
Catalytica, Inc. (the "Company") is developing and offering to its customers
advanced products that use the Company's proprietary catalytic technologies to
yield economic and environmental benefits by lowering manufacturing costs and
reducing hazardous byproducts. Catalytica currently is focused on applying its
technologies to two primary areas: (i) improving production of pharmaceutical
intermediates and bulk actives and (ii) developing advanced combustion systems
to reduce toxic emissions generated by natural gas turbines. To pursue these
opportunities, the Company has created two operating subsidiaries, Catalytica
Pharmaceuticals and Catalytica Combustion Systems, Inc. ("Combustion Systems").
In addition to market focus, the formation of subsidiaries provides increased
flexibility for strategic financial arrangements and business partnerships.
Catalytica Pharmaceuticals develops and uses its technology base to develop
proprietary manufacturing processes which it uses for the more cost-effective
and environmentally benign production of pharmaceutical intermediates.
Catalytica Pharmaceuticals manufactures products for several leading
pharmaceutical companies, including Pharmacia & Upjohn, Inc. ("Pharmacia &
Upjohn"), Merck & Co. ("Merck") and Pfizer, Inc. ("Pfizer"). Catalytica
Pharmaceuticals also is producing an intermediate for Novartis (formerly
Sandoz) under a supply agreement entered into at the time the Company purchased
its manufacturing plant from Novartis in 1993. Catalytica Pharmaceuticals is
capitalizing on market opportunities created by major changes that are
occurring in the pharmaceutical industry that are causing pharmaceutical
companies to outsource certain manufacturing activities. These changes include
increased pricing pressures on pharmaceutical companies, the need to shorten
drug development cycles and more stringent environmental and FDA regulations.
On July 31, 1997, Catalytica Pharmaceuticals, Inc. (formerly Catalytica Fine
Chemicals, Inc.), a subsidiary of the Company, acquired from Glaxo Wellcome
Inc. a pharmaceutical manufacturing facility (the "Facility") located in
Greenville, North Carolina (the "Acquisition"), in exchange for (i) $246.6
million in cash subject to a post-closing adjustment based on closing date
inventory levels; (ii) 250,000 shares of Junior Preferred Stock of Catalytica
Pharmaceuticals; (iii) warrants to purchase 2,000,000 shares of the Company's
Common Stock at an exercise price of $12.00 per share and (iv) 10% of the
earnings before interest and taxes in excess of an aggregate cumulative amount
of $10 million attributable to the sterile products portion of the Facility, up
to an aggregate cumulative payment to Glaxo Wellcome of an additional $25.0
million. In connection with the Acquisition, Glaxo Wellcome and Catalytica
Pharmaceuticals have entered into a supply agreement under which Catalytica
Pharmaceuticals will manufacture products for Glaxo Wellcome over the next one
and a half years for secondary products and over the next five years for
primary products (the "Supply Agreement").
Combustion Systems is developing its XONON Flameless Combustion system
("XONON System") to reduce or eliminate certain toxic emissions produced by
natural gas turbines, including NOx, carbon monoxide and unburned hydrocarbons.
Combustion Systems' proprietary products are being developed for use by
utilities and other manufacturers and users of power generation systems.
Combustion Systems is currently working with leading turbine manufacturers,
including: General Electric in large turbines; Allison, a subsidiary of Rolls
Royce, and Solar, a subsidiary of Caterpillar, Inc., in medium size turbines;
and, through GENXON Power Systems, LLC, the Company's new joint venture
company, AGC, in small Kawasaki turbines for cogeneration applications.
The Company's executive offices are located at 430 Ferguson Drive, Mountain
View, California 94043 and its telephone number is (408) 960-3000.
4
<PAGE>
THE WARRANT ISSUANCE
The Company is distributing at no cost to holders of record of its Common
Stock on the Record Date, one Warrant for each three shares of Common Stock
held on the Record Date. No warrants to purchase fractional shares will be
issued and accordingly the number of Warrants to be issued to each holder will
be rounded down to the nearest whole number of Warrants.
<TABLE>
<C> <S>
Description............. Each Warrant entitles the holder to purchase at an
exercise price of $4.00 one share of Common Stock. On
July , 1997 the closing price of the Common Stock
on The Nasdaq National Market was $ per share. See
"The Warrant Issuance."
Record Date............. , 1997 (the "Record Date").
Warrant Expiration
Date................... 5:00 p.m. (Pacific time), , 1997 (the "Warrant
Expiration Date").
Nasdaq National Market
Symbols................ Common Stock . . . . . . . . . . . "CTAL"
Warrants . . . . . . . . . . . . . . . . "CTALW"
(proposed)
Capital Stock
Outstanding
Prior to the Warrant
Dividend............... Approximately 49,905,790 shares.(1)
Capital Stock
Outstanding after the
Warrant Dividend....... Approximately 51,541,042 shares, assuming the
exercise of all Warrants.(1)(2)
Use of Proceeds......... The maximum net proceeds to the Company from the sale
of the Common Stock issuable upon exercise of the
Warrants are estimated to be approximately
$26.5 million (assuming all of the shares of Common
Stock offered hereby are purchased pursuant to the
exercise of the Warrants and after deducting
estimated expenses of the Warrant Issuance). The
Company intends to use the net proceeds from the
exercise of the Warrants to repurchase up to an
aggregate of 5,000,000 shares of its Class B Common
Stock issued to Morgan Stanley Capital Partners III,
L.P., Morgan Stanley Capital Investors, L.P., and
MSCP III 892 Investors, L.P. (collectively "MSCP") on
July 31, 1997. The repurchase price will be $4.75 per
share, if such repurchase is consummated prior to
November 30, 1997, and $5.00 per share, if
consummated after November 30, 1997 and prior to May
31, 1998. The Class A Common Stock and Class B Common
Stock may not be repurchased after May 31, 1998. See
"The Warrant Issuance" and "Use of Proceeds."
Risk Factors............ An investment in the Common Stock issuable upon
exercise of the Warrants involves a high degree of
risk. See "Risk Factors."
</TABLE>
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(1) Based on the number of shares of Common Stock outstanding on July 31, 1997.
Includes 13,270,000 shares of Class A Common Stock and 16,730,000 shares of
Class B Common Stock. Excludes options to purchase shares of Common
Stock outstanding as of the Record Date.
(2) Excludes 5,000,000 shares of Class B Common Stock that the Company intends
to repurchase with the proceeds of the Warrant Issuance.
5
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act,
including those statements which have been identified by an asterisk ("*") and
other statements regarding the Company's strategy, financial performance and
revenue sources. Actual results could differ materially from those projected
in the forward-looking statements as a result of the risk factors set forth
below and elsewhere in this Prospectus. In addition to the other information
in this Prospectus, the following factors should be carefully considered in
evaluating the Company and its business before making a decision to purchase
the Common Stock underlying the Warrants.
History of Operating Losses and Uncertainty of Future Results. The Company's
business has not been profitable to date, and as of March 31, 1997, the
Company had an accumulated deficit of $50.5 million. To achieve profitable
operations, Catalytica must successfully manage the operations of the
Facility, and, to a lesser extent, successfully develop, manufacture,
introduce and market or license its combustion systems and catalytic
processes. The Company's success will depend on its ability to complete the
transition from emphasizing research and development to full commercialization
and sale of its products. The Company began manufacturing, marketing and
selling pharmaceutical intermediates in 1994 and, pursuant to the Acquisition
of the Facility, will substantially increase its manufacturing of
pharmaceutical intermediates in 1997.
The additional facilities, employees and business volumes resulting from the
Acquisition will substantially increase the expenses and working capital
requirements and place substantial burdens on the Company's management
resources. Furthermore, the success of the Acquisition and the Company's
future results depend, in significant part, on the levels of manufacturing
business developed by Catalytica Pharmaceuticals. In the event Catalytica
Pharmaceuticals does not obtain additional new customers, which could involve
additional business from Glaxo Wellcome, on terms sufficient to offset the
costs associated with operating and maintaining the Facility, and with
servicing the debt incurred in connection with the acquisition of the
Facility, the Company's consolidated results of operations and financial
condition would be materially adversely affected.
Due to the size of the Acquisition, the results of operations of Catalytica
Pharmaceuticals will have a material effect on the consolidated results of
operations of the Company, and the results of operations of the Company's
other businesses will be insignificant for the remainder of 1997 and 1998.*
The anticipated revenues from the Supply Agreement with Glaxo Wellcome are
expected to allow the Company to achieve profitable operations for Catalytica
Pharmaceuticals for the remainder of 1997 and for 1998.* After 1998,
Catalytica Pharmaceuticals' profitability will depend on its success and
timing in obtaining new customers, including possible new agreements with
Glaxo Wellcome.* The Company anticipates that its income (loss) per share will
be adversely affected in the second half of 1997, when it expects to
repurchase up to 5,000,000 shares of its Class B Common Stock from MSCP at a
price of $4.75 per share with the proceeds of the Warrant Issuance.
Manufacturing at the Facility is conducted in three district operations:
primary, secondary and sterile. There is excess manufacturing capacity
available at the primary facility beginning in mid 1998 and based on marketing
efforts to date Catalytica Pharmaceuticals expects it will have one or more
customers for some or all of the unused primary facility beginning in mid
1998.* There is substantial excess manufacturing capacity immediately
available at the secondary and sterile facilities, but because of the long
lead times required to obtain necessary regulatory approvals to manufacture
secondary and sterile products at these facilities, Catalytica Pharmaceuticals
does not anticipate additional significant revenue from such facilities until
1998 or 1999 at the earliest. Catalytica Pharmaceuticals' inability to fill
additional available capacity or to reduce costs in conjunction with lower
levels of capacity utilization would have a material adverse effect on the
Company's results of operations.
Management of Substantially Increased Operations and Need for New Computer
System. The Company currently expects that revenues from the operation of the
Facility will represent a substantial portion of the Company's consolidated
revenues for the foreseeable future. The acquisition of the Facility and the
associated Supply Agreement are expected to expand Catalytica Pharmaceuticals'
revenues from $16.3 million during 1996 to an annualized revenue rate in
excess of $300 million in the second half of 1997 and in 1998.* Existing
6
<PAGE>
management has only limited prior experience in managing a large and
geographically dispersed operation. The Company expects to experience certain
inefficiencies as it begins managing and integrating the operations of the
Facility. Computer systems are used at the Facility to properly track and
record the processing and distribution of products according to drug form,
dose, packaging and destination. Catalytica Pharmaceuticals believes that
based on anticipated changes in operations, the nature of serving multiple
customers and the nature of being a contract manufacturer versus an integrated
pharmaceutical company, that it will need to replace the computer system that
is currently used at the Facility over the next several years. The Company
will need to carefully plan a transition to a new computer system to avoid any
disruption to its business. If the transition is not successfully executed, it
could have a material adverse effect on the Company's results of operations.
Reliance on Relationship with Glaxo Wellcome. Catalytica Pharmaceuticals
estimates that aggregate payments by Glaxo Wellcome under the Supply Agreement
will total approximately $800 million, which include guaranteed revenues plus
the cost of raw materials.* The annual level of guaranteed revenues declines
significantly after 1998, but is expected to continue to represent a
significant source of revenue for Catalytica Pharmaceuticals.* Catalytica
Pharmaceuticals is substantially dependent on Glaxo Wellcome for the next two
and one half years and will continue to be dependent on Glaxo Wellcome in part
thereafter until the end of the term of the Supply Agreement. Catalytica
Pharmaceuticals' business and the Company's consolidated results of operations
would be adversely affected if Catalytica Pharmaceuticals does not
successfully perform its obligations under the Supply Agreement. This could
result in increased costs to the Company or in possible termination of the
Supply Agreement by Glaxo Wellcome.
New Operating Strategy and Need to Hire Additional Personnel. The Facility
has been operated primarily as a captive manufacturing facility by Glaxo
Wellcome with only a limited portion of the Facility devoted to third party
manufacturing. Accordingly, the employees currently operating the Facility and
the manager hired to manage the operations of the Facility have limited prior
experience in conducting operations as a third party manufacturer. There is
limited infrastructure and an insufficient number of personnel at the Facility
currently involved in sales and marketing, research and development, payroll,
purchasing, accounting and information systems functions. The Company will
need to establish and maintain the appropriate infrastructure and hire and
train qualified personnel to perform these functions at the Facility. There
can be no assurance that the Company will successfully establish the
infrastructure or be able to hire qualified personnel in a timely fashion.
There can be no assurance that Catalytica Pharmaceuticals will be able to
establish a successful sales and marketing capability. Any failure to
successfully establish these capabilities at the Facility on a timely basis
would have a material adverse effect on the Company's consolidated results of
operations.
Dependence on Key Personnel. The Company's success is dependent on the
retention of principal members of its management and scientific staff and on
the ability to continue to attract, motivate and retain additional key
personnel. Competition for such key personnel is intense, and the loss of the
services of key personnel or the failure to recruit necessary additional
personnel could have a material adverse effect on the Company's operations and
on its research and development efforts. The Company does not have non-
competition agreements with any of its key employees. The Company's
anticipated expansion into areas and activities requiring additional
expertise, such as manufacturing, marketing and distribution, are expected to
place increased demands on the Company's resources. These activities are
expected to require the addition of new personnel with expertise in these
areas and the development of additional expertise by existing personnel. The
successful integration of the Facility with the operations of Catalytica
Pharmaceuticals will be significantly dependent upon Catalytica
Pharmaceuticals' ability to attract and retain the personnel (including former
Glaxo Wellcome employees) necessary to effectively integrate, and thereafter
operate, the combined businesses. In this regard, Catalytica Pharmaceuticals
has hired certain key managers of the Facility. Any failure on the part of
Catalytica Pharmaceuticals to attract or retain necessary personnel would have
a material adverse effect on the Company's consolidated results of operations.
Uncertainties Related to Combustion Systems Business. The Company, through
its subsidiary Catalytica Combustion Systems, Inc. ("CCSI"), and the GENXON
joint venture, is still conducting research and development on its combustion
systems. Prior to commercialization of its combustion systems, the Company's
7
<PAGE>
products will be required to undergo rigorous testing by turbine
manufacturers. Ultimate sales of the Company's combustion system products will
depend upon the acceptance and use of the Company's technology by a limited
number of turbine manufacturers and the Company's ability to enter into
commercial relationships with these manufacturers. The Company's subsidiary,
CCSI, is currently working with leading turbine manufacturers, including:
General Electric in large turbines, Allison Engine Co., a subsidiary of Rolls
Royce, and Solar, a subsidiary of Caterpillar, Inc., in medium size turbines.
In addition, through its joint venture company GENXON, CCSI is developing
complete combustor systems for Affiliated Group of Companies (AGC), to be used
on small Kawasaki Heavy Industries turbines for mobile cogeneration
applications. GENXON is also developing complete combustor systems utilizing
Catalytica's combustion technology for end users to be retro fitted on older
out-of-warranty turbines no longer supported by OEM's. Neither the Company,
its subsidiary CCSI, nor the joint venture company GENXON have formal long-
term agreements in place with many of these companies. The Company's ability
to complete research and development and introduce commercial systems for
these markets would be adversely affected if any of these companies terminated
its relationship with the Company or GENXON. If such terminations occurred,
there is no assurance as to whether the Company could enter into a similar
relationship with another manufacturer.
The Company currently has limited manufacturing and marketing capability for
its combustion products. The Company's existing facilities are inadequate for
commercial production of the combustion products under development, and to the
extent that the Company chooses to produce commercial quantities of its
products, the Company will be required to develop or acquire manufacturing
capability. In order to market any of its combustion system products, the
Company will be required to develop marketing capability, either on its own or
in conjunction with others. There can be no assurance that the Company will be
able to manufacture its products successfully or develop an effective
marketing and sales organization. In addition, some of the Company's
combustion systems and processes are expected to be sold as components of
large systems such as natural gas turbines for electric power plants.
Accordingly, the rate of adoption of the Company's systems and processes may
depend in part on economic conditions which affect capital investment
decisions, as well as the regulatory environment. There can be no assurance
that the Company's combustion products will be economically attractive when
compared to competitive products.
In October 1996 Combustion Systems and Woodward Governor Company formed a
Delaware limited liability company in connection with a 50/50 joint venture to
serve the gas turbine retrofit market for installed, out-of-warranty engines.
The new company, GENXON(TM) Power Systems, LLC ("GENXON"), will initially
provide gas turbine fleet asset planning and utilization services for both
power generation and mechanical drive markets. GENXON plans to deliver an
integrated product portfolio which includes Combustion Systems' system for
ultra low NOx emissions, Woodward's control systems, turbine overhaul and
upgrades, as well as contract maintenance and service. Unlike Catalytica
Combustion Systems' efforts to date which have focused only on the design of
the catalyst assembly, GENXON is developing entire combustion systems. The
development of complete combustion systems by GENXON to serve the retrofit
market will require the design of new combustion chambers to be retrofitted on
existing turbines. This new combustion chamber will incorporate a XONON
catalyst. There can be no assurance that GENXON will be successful in
developing new combustion chambers that will work in lieu of the current
design that does not incorporate a catalyst. There can be no assurance that
GENXON's products will be economically attractive when compared to competitive
products.
Future Capital Requirements and Uncertainty of Additional Funding; Increased
Leverage. The Company's operations to date have required substantial amounts
of cash. As part of the financing of the Acquisition, Catalytica
Pharmaceuticals incurred approximately $140 million of long-term indebtedness.
The Company and its subsidiaries have guaranteed this indebtedness. As a
result of this increased leverage, Catalytica Pharmaceuticals' principal and
interest obligations will be increased substantially. The Company anticipates
that cash flows associated with the Supply Agreement will be sufficient to
reduce indebtedness incurred in connection with the Acquisition to a level
supportable by the current assets of the Company. The degree to which
Catalytica Pharmaceuticals is leveraged could adversely affect Catalytica
Pharmaceuticals' and the Company's ability to obtain additional financing for
working capital, acquisitions or other purposes and could make Catalytica
Pharmaceuticals and the Company more vulnerable to economic downturns and
competitive pressures. The
8
<PAGE>
Company's future capital requirements will depend on many factors, including
Catalytica Pharmaceuticals level of business beyond the Supply Agreement with
Glaxo Wellcome, the rate of commercialization of the Company's catalytic
combustion systems, and the need to expand manufacturing capacity for
pharmaceutical or combustion systems business. Adequate funds for future
operations, whether from the financial markets or from collaborative or other
arrangements, may not be available when needed or on terms acceptable to the
Company and, if available or acceptable to the Company, may result in
significant dilution to existing stockholders.
Risk of Product Liability. Although Catalytica Pharmaceuticals intends to
seek indemnification from its customers for any product liability claims that
may result from the pharmaceutical products it produces, there can be no
assurance that Catalytica Pharmaceuticals will not ultimately be found liable
for any product liability claims regarding products it manufactures.
Catalytica Pharmaceuticals expects it will be required to indemnify its
customers for product liability claims if a manufacturing defect results in
injury. There can be no assurance that Catalytica Pharmaceuticals will be able
to obtain or maintain product liability insurance in the future on acceptable
terms or with adequate coverage against potential liabilities. If Catalytica
Pharmaceuticals is found liable in a product liability claim and the Company
does not have adequate product liability insurance or indemnification, the
Company's consolidated results of operations could be materially adversely
effected. Additionally, under the Supply Agreement, Catalytica Pharmaceuticals
will be obligated to maintain $100,000,000 of product liability insurance. If
Catalytica Pharmaceuticals does not meet this requirement, it would be
considered a default under the Supply Agreement.
Hazardous Materials and Environmental Matters. The Company's research and
development activities and fine chemicals manufacturing involve the use of
many hazardous chemicals. The use of such chemicals will significantly
increase as a result of the acquisition of the Facility from Glaxo Wellcome.
The Company is subject to extensive federal, state and local laws and
regulations governing the use, manufacture, storage, handling and disposal of
such materials and associated waste products. The Company believes that its
properties and operations comply in all material respects with applicable
environmental laws; however, the risk of environmental liabilities cannot be
completely eliminated. Public awareness of environmental issues has increased
the impact of such laws on the conduct of manufacturing operations and
ownership of property. Any failure by the Company to comply with present or
future environmental laws could result in cessation of portions or all of the
Company's operations, impositions of fines, restrictions on the Company's
ability to carry on or expand its operations, significant expenditures by the
Company to comply with environmental laws and regulations, and/or liabilities
in excess of the resources of the Company. The Company has environmental
impairment insurance with regard to first party and third party liability in
the amount of $25,000,000 (with a $1,000,000 retention) with respect to the
Facility only. There can be no assurance that the Company will not be required
to make renovations or improvements to comply with environmental laws and
regulations in the future. The Company's operations, business or assets could
be materially adversely affected in the event such environmental laws or
regulations require the Company to modify current facilities substantially or
otherwise limit the Company's ability to conduct or expand its operations.
Catalytica Pharmaceuticals expects that significant expenditures may be
incurred at the Facility as a result of new environmental regulations
currently under consideration. The United States Environmental Protection
Agency (the "EPA") is considering new regulations for the pharmaceutical
industry under the authority of the federal Clean Air Act. These proposed
regulations would require the installation of "Maximum Achievable Control
Technology" for certain hazardous air pollutant emissions sources
("Pharmaceutical MACT"). The EPA is also considering changes to its
particulate matter emissions regulations as well as regulation of certain
ozone precursor emissions. As these rules are in the early stages of
consideration by the EPA, and as there can be no assurance of their adoption,
the additional cost of complying with such regulations cannot be determined at
this time. There can be no assurance that Catalytica Pharmaceuticals will not
be required to make additional renovations or improvements to comply with
environmental laws and regulations in the future. Catalytica Pharmaceuticals'
operations, business and assets could be materially adversely affected in the
event such environmental laws or regulations require Catalytica
Pharmaceuticals to modify the current Facility substantially or otherwise
limit Catalytica Pharmaceuticals' ability to conduct or expand its operations.
9
<PAGE>
Current and Potential Environmental Contamination at Catalytica
Pharmaceuticals' Two Sites. The Company through a subsidiary leases the land
on which its Bayview facility in East Palo Alto, California is located from
Rhone Poulenc, Inc., ("Rhone Poulenc"). The past activities of Rhone Poulenc's
predecessor caused significant soil and groundwater contamination of the
facility and a down gradient area located along the San Francisco Bay.
Consequently, the site is subject to a clean up and abatement order issued by
the Bay Area Regional Water Quality Control Board ("RWQCB") which currently
requires stabilization, containment and monitoring of the arsenic and volatile
organic contamination at the site and surrounding areas. The ground lease
between Rhone Poulenc and the Company includes an indemnity by Rhone Poulenc
against any costs and liabilities that the Company might incur to fulfill the
RWQCB order and to otherwise address the contamination that is the subject of
the order. The Company also has obtained an indemnification from Novartis (the
immediately preceding owner/operator of the facility) against any costs and
liability the Company may incur with respect to any contamination caused by
Novartis' operations. However, there can be no assurance that the Company will
not be held responsible with respect to the existing contamination or named in
an action brought by a governmental agency or a third party because of such
contamination. If the Company is held responsible and it has contributed to
the contamination, it will be liable for any damage to third parties, and will
be required to indemnify Rhone Poulenc and Novartis for any additional clean
up costs or liability they may incur, with respect to the contamination caused
by the Company. The determination of the existence and additional cost of any
such incremental contamination contribution by the Company could involve
costly and time-consuming negotiations and litigation. Further, any such
incremental contamination by the Company or the unenforceability of either of
the indemnity agreements described above could materially adversely affect the
Company's business and results of operations.
Glaxo Wellcome has been working with the EPA and the North Carolina
Department of Environment, Health and Natural Resources (the "NCDEHNR") to
investigate, identify and remediate contamination in the soil and groundwater
at the Facility. This investigation, carried out pursuant to the federal
Resource Conservation and Recovery Act, has identified 16 different areas of
the Facility where contamination has or may have occurred. Of these 16 areas,
at least five have been identified as requiring further investigation and
remediation by NCDEHNR ("Site Contamination"). Contaminants found in the soil
and groundwater at the Facility include solvents, petroleum hydrocarbons and
pesticides. As the new owner of the Facility, Catalytica Pharmaceuticals will
become liable for such contamination. Although it is unknown at this time what
further remediation will be required at the Facility and the cost of such
remediation, Glaxo Wellcome has agreed to be primarily liable for any
contamination at the Facility site prior to the closing of the Acquisition and
to perform, at its cost, the remediation required by law for contamination of
the soil and groundwater existing at the Facility as of the Closing. The
Environmental Agreement with Glaxo Wellcome also requires Catalytica
Pharmaceuticals to provide access to the Facility and certain facility
services as required for the remediation, subject to reimbursement by Glaxo
Wellcome. However, there can be no assurance that the Company or Catalytica
Pharmaceuticals will not incur unreimbursed costs or suffer an interference
with ongoing operations as a result of Glaxo Wellcome's remediation activities
or the existence of contamination at the Facility. In addition, the Company's
future development of the Facility may be limited by the existence of
contamination or Glaxo Wellcome's remediation activities. There also can be no
assurance that Catalytica Pharmaceuticals' ongoing operations at the Facility
will not cause additional contamination. The determination of the existence
and cost of any such additional contamination contributed by Catalytica
Pharmaceuticals of the Company could involve costly and time-consuming
negotiations and litigation. Furthermore, any such contamination caused by
Catalytica Pharmaceuticals or the Company could materially adversely affect
the business, results of operations and financial condition of Catalytica
Pharmaceuticals and the consolidated results of operations and financial
condition of the Company.
In addition, a significant amount of asbestos containing material ("ACM") is
present at the Facility. Catalytica Pharmaceuticals believes that the ACM, in
its present condition, does not require abatement. Abatement will only be
required if and as renovations are performed in those areas containing ACM.
Catalytica Pharmaceuticals cannot presently predict whether, when or to what
extent it may need or desire to renovate areas of the Facility containing ACM.
However, should such renovations be necessary, the additional costs could be
10
<PAGE>
substantial. The cash consideration for the Facility was reduced by
approximately $6,400,000, in exchange for the assumption by the Company and
Catalytica Pharmaceuticals of the liability associated with the abatement of
ACM present at the Facility. There is no assurance that such amount will be
adequate to cover the costs associated with any future abatement of ACM at the
Facility. See also "Hazardous Materials and Environmental Matters."
Catalytica Pharmaceuticals' Compliance with FDA Regulations. Many of the
fine chemicals products Catalytica Pharmaceuticals manufactures, or will
manufacture in the future, and the final drug products in which they are used
are subject to regulation for safety and efficacy by the FDA and foreign
regulatory authorities before such products can be commercially marketed. The
process of obtaining regulatory clearances for marketing is uncertain, costly
and time consuming. Catalytica Pharmaceuticals cannot predict how long the
necessary regulatory approvals will take or if its customers will ever obtain
such approval for their products. To the extent Catalytica Pharmaceuticals'
customers do not obtain the necessary regulatory approvals for marketing new
products, Catalytica Pharmaceuticals' fine chemicals product sales will be
adversely affected.
Upon completion of the Acquisition, Catalytica Pharmaceuticals intends to
manufacture bulk actives. To do so, Catalytica Pharmaceuticals would be
required to comply with the FDA's current Good Manufacturing Practices
("cGMP") regulations, and certain of Catalytica Pharmaceuticals' customers may
also require Catalytica Pharmaceuticals to adhere to cGMP regulations, even if
not required by the FDA. In complying with cGMP regulations, manufacturers
must continue to expend time, money and effort in production, recordkeeping
and quality control to ensure that the product meets applicable specifications
and other requirements. The FDA periodically inspects drug manufacturing
facilities to ensure compliance with applicable cGMP requirements. Failure to
comply subjects the manufacturer to possible FDA action, such as suspension of
manufacturing. The FDA also may require the submission of any lot of the
product for inspection and may restrict the release of any lot that does not
comply with FDA regulations, or may otherwise order the suspension of
manufacture, recall or seizure. If the Acquisition is completed, Catalytica
Pharmaceuticals will also be required to comply with cGMP requirements for the
facility. Failure of Catalytica Pharmaceuticals' customers to obtain and to
maintain FDA clearance for marketing of the products manufactured by
Catalytica Pharmaceuticals, or failure of Catalytica Pharmaceuticals to comply
with cGMP regulations as required by the FDA or Catalytica Pharmaceuticals'
customers, would have a material adverse effect on the Company's results of
operations.
Influence of Environmental Regulations on Rate of Commercialization. The
rate at which the Company's catalytic combustion systems are adopted by
industrial companies will be heavily influenced by the enactment and
enforcement of environmental regulations at the federal, state and local
levels. Current federal law governing air pollution generally does not mandate
the specific means for controlling emissions, but instead, creates ambient air
quality standards for individual geographic regions to attain through
individualized planning on a regional basis in light of the general level of
air pollution in the region. Federal law requires state and local authorities
to determine specific strategies for reducing emissions or specific
pollutants. Among other strategies, state and local authorities in all areas
which do not meet ambient air quality standards must adopt performance
standards for all major new and modified sources of air pollution. The more
polluted the air in a particular region has become, the more stringent such
controls must be. The Company's revenues will depend, in part, on the
standards, permit requirements and programs these state and local authorities
promulgate for reducing emissions (including emissions of NOx) addressed by
the Company's combustion and monitoring products systems. Demand for the
Company's systems and processes will be affected by how quickly the standards
are implemented and the level of reductions required. Certain industries or
companies may successfully delay the implementation of existing or new
regulations or purchase or acquire emissions credits from other sources, which
could delay or eliminate their need to purchase the Company's systems and
processes. Moreover, new environmental regulations may impose different
requirements which may not be met by the systems and processes being developed
by Catalytica or which may require costly modifications of the Company's
products. The United States Congress is currently reviewing existing
environmental regulations. There can be no certainty as to whether Congress
will amend or modify existing regulations in a manner that could have an
adverse effect on demand for the Company's combustion system products.
11
<PAGE>
Competition and Technological Change. There are numerous competitors in a
variety of industries in the United States, Europe and Japan which have
commercialized and are working on technologies that could be competitive with
those under development by the Company, including both catalytic and other
technological approaches. Some of these competitive products are in more
advanced stages of development and testing. The Company's competitors may
develop technologies and systems and processes that are more effective than
those being developed by the Company or that would render the Company's
technology and systems and processes less competitive or obsolete. In the fine
chemicals market, the Company faces its primary competition from
pharmaceutical companies that produce their own fine chemicals and from other
fine chemicals manufacturers such as Lonza AG and DSM Fine Chemicals. In the
combustion systems market, the Company faces its primary competition from
large gas turbine power generation manufacturers, such as General Electric Co.
("General Electric"), Allison Engine Company ("Allison") and Solar Turbines
Incorporated ("Solar"), each of which is developing competing DLN systems for
their own turbines. Many of the Company's competitors in the combustion
systems market are also potential customers of the Company, and the Company
expects to rely on these potential customers to help commercialize its
products. Most of these competitors have greater research and development
capabilities, financial resources, managerial resources, marketing experience
and manufacturing experience than the Company. If these companies are
successful in developing such products, the Company's ability to sell its
systems and processes would be materially adversely affected. Further, since
many of the Company's competitors are existing or potential customers, the
Company's ability to gain market share may be limited.
Patents and Intellectual Property. The Company has an active program of
pursuing patents for its inventions in the United States and in markets
throughout the world relevant to its business areas. The Company has 38 United
States patents and 13 pending United States patent applications, plus 70
foreign patents and patent applications.
The Company's success will depend on the ability to continue to obtain
patents, protect trade secrets and operate without infringing on the
proprietary rights of others in the United States and other countries. There
can be no assurance that the Company's patent applications will result in the
issuance of any patent, that any of the Company's existing patents or any
patents that may be issued in the future will provide significant proprietary
protection, that any such patents will be sufficiently broad to protect the
Company's technology, or that any such patents will not be challenged,
circumvented or invalidated. There can also be no assurance that the patents
of others will not have an adverse effect on the Company. Others may
independently develop similar systems or processes or design around patents
issued to the Company. In addition, the Company may be required to obtain
licenses to patents or other proprietary rights. The Company cannot assure
that any licenses required under any such patents or proprietary rights would
be made available on terms acceptable to the Company, if at all. If Catalytica
requires and does not obtain such licenses, it could encounter delays in
system or process introductions while it attempts to design around such
patents, or it could find that the development, manufacture, sale or licensing
of systems or processes requiring such licenses could be foreclosed. The
Company could incur substantial costs in defending itself or its licensees in
litigation brought by others or prosecuting infringement claims against third
parties. The Company could incur substantial costs in interference proceedings
declared by the United States Patent and Trademark Office in connection with
one or more of the Company's or third parties' patents or patent applications,
and those proceedings could also result in an adverse decision as to the
priority of the Company's inventions. The Company also protects its
proprietary technology and processes in part by confidentiality agreements
with its collaborative partners, employees and consultants. There can be no
assurance that these agreements will not be breached, that the Company will
have adequate remedies for any breach, or that the Company's trade secrets
will not otherwise become known or be independently discovered by competitors.
Concentration of Ownership. Prior to the Warrant Issuance, Morgan Stanley
Capital Partners III, L.P. and two affiliated funds (collectively, "MSCP")
beneficially own approximately 40% of the voting control of the Company and
60% of the outstanding capital stock of the Company. Upon completion of the
contemplated repurchase by the Company of 5,000,000 shares of Class B Common
Stock from MSCP, MSCP will beneficially
12
<PAGE>
own approximately 40% of the voting control of the Company and 48.5% of the
outstanding capital stock of the Company. As a result, MSCP is able to
exercise significant influence over all matters requiring stockholder
approval, including the election of directors and approval of all significant
corporate transactions such as any merger, consolidation or sale of all or
substantially all of the Company's assets. Moreover, the Company has granted
to MSCP certain contractual rights, including representation on the Company's
Board of Directors and committees of the Board of Directors, that will give
MSCP additional rights to participate in certain actions to be taken by the
Company. Such concentration of ownership and contractual rights may have the
effect of delaying, deferring or preventing a change of control of the
Company. The sale by MSCP of shares of the Company's capital stock could
constitute a change of control under the Company's credit agreement which
would trigger a default of the agreement. MSCP has agreed not to trigger a
change of control under the credit agreement. In addition, such concentration
of ownership and contractual rights could allow MSCP to prevent significant
corporate transactions. In addition, Glaxo Wellcome owns approximately 1.5% of
the outstanding capital stock of Catalytica Pharmaceuticals and owns a warrant
to purchase 2,000,000 shares of Common Stock which represents approximately
3.8% of the Company's outstanding capital stock.
Uncertainty of Stock Price After Warrant Issuance. The Company cannot be
certain what effect the issuance of up to 6,635,263 shares of Common Stock
pursuant to the Warrant Issuance at $4.00 per share, combined with the planned
repurchase of up to 5,000,000 shares of Class B Common Stock, will have on the
market price of the Common Stock. On , 1997, the last reported sale
price of the Common Stock on The Nasdaq National Market was $ per share.
Registration of Additional Shares; Shares Eligible For Future
Sale. Beginning after July 1, 1998, MSCP has registration rights with respect
to the shares of Common Stock issuable upon conversion of the Class A Common
Stock and Class B Common Stock owned by it. Future resales in the public
market of the Common Stock by MSCP (whether pursuant to the registration
rights or otherwise) could adversely affect the market price of the Common
Stock.
13
<PAGE>
USE OF PROCEEDS
The maximum net proceeds to the Company from the sale of the Common Stock
issuable upon exercise of the Warrants are estimated to be approximately $26.5
million (assuming all of the shares of Common Stock offered hereby are
purchased pursuant to the exercise of the Warrants and after deducting
estimated expenses of the Warrant Issuance). The Company intends to use the
net proceeds from the exercise of the Warrants to repurchase up to an
aggregate of 5,000,000 shares of its Class A Common Stock and Class B Common
Stock issued to MSCP on July 31, 1997. The repurchase price will be $4.75 per
share, if such repurchase is consummated on or prior to November 30, 1997, and
$5.00 per share, if consummated after November 30, 1997 and prior to May 31,
1998. The Class A Common Stock and Class B Common Stock may not be repurchased
after May 31, 1998. Remaining proceeds, if any, of the Warrant Issuance will
be used for general corporate purposes.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
June 30, 1997, (ii) as adjusted to give effect to the issuance of the Class A
Common Stock and Class B Common Stock and the incurrence of long term debt in
connection with the acquisition of the manufacturing facility from Glaxo
Wellcome Inc. on July 31, 1997, and (iii) pro forma as adjusted to give effect
to the sale and issuance of the shares of Common Stock underlying the Warrants
offered by the Company hereby, assuming the exercise of all of the Warrants
(based on the Warrant Price of $4.00 per share and after deducting the
estimated offering expenses), and the application of the net proceeds
therefrom to repurchase 5,000,000 shares of Class A Common Stock and Class B
Common Stock (assuming a $4.75 per share repurchase price). See "Use of
Proceeds."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
------------------------------------
AS ADJUSTED PRO FORMA,
ACTUAL FOR ACQUISITION AS ADJUSTED
------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt........................... 1,285 139,941(1) 139,941(1)
Non-current deferred revenue............. 4,287 4,287 4,287
Other accrued liabilities................ -- 6,400(3) 6,400
Minority interest........................ 8,000 11,000(4) 11,000
Class A Common Stock, $.001 par value;
30,000,000 shares authorized, 13,320,000
issued and outstanding actual and pro
forma as adjusted(2).................... -- 52,170(1) 52,170
Class B Common Stock, $.001 par value;
17,000,000 shares authorized, 16,680,000
issued and outstanding actual,
11,680,000 issued and outstanding pro
forma as adjusted(2).................... -- 65,330(1) 45,330
Stockholders' equity:
Preferred Stock, $.001 par value;
5,000,000 shares authorized, none
issued and outstanding at June 30,
1995.................................. -- -- --
Common Stock, $.001 par value;
120,000,000 shares authorized, 19,
issued and outstanding actual,
issued and outstanding pro forma
as adjusted(6)........................ 20 20 27
Additional paid-in capital............. 66,050 70,050(5) 92,929
Deferred compensation.................. (19) (19) (19)
Accumulated deficit.................... (52,350) (52,350) (52,350)
------- ------- -------
Total stockholders' equity........... 13,701 17,701 40,587
======= ======= =======
</TABLE>
- --------
(1) Represents (i) the proceeds of $120 million derived from the issuance of
the Class A Common Stock and Class B Common Stock, net of related issuance
costs of $2.5 million and (ii) $140 million from the assumed borrowings
under the Senior Credit Facility, net of related issuance costs of $4
million and repayment of existing borrowings of approximately $5 million.
(2) Terms of the Class A Common Stock and Class B Common Stock enable the
holders, at any time after July 1, 2005, the option to require the Company
to repurchase the outstanding shares of Class A and Class B common stock
for cash based on the original consideration paid for such shares on the
Closing Date of the Acquisition. In accordance with SEC regulations, the
Class A Common Stock and Class B Common Stock is therefore not shown as
part of equity.
(3) Represents a reduction in the cash consideration to be paid by Glaxo
Wellcome in exchange for assumption of the liability relating to any
required asbestos remediation by Catalytica Pharmaceuticals.
(4) Reflects the estimated fair value of the 250,000 shares of junior
convertible preferred stock of Catalytica Pharmaceuticals provided as
additional consideration in connection with the Acquisition.
(5) Reflects the estimated fair value of the warrants provided as additional
consideration in connection with the Acquisition which entitle Glaxo
Wellcome, at its discretion, to purchase 2,000,000 shares of the Company's
Common Stock, and the repurchase of 5,000,000 shares of Class B Common
Stock at a price of $4.75 per share.
(6) Excluding shares of Common Stock reserved for issuance under
the Company's current employee benefit plans, pursuant to which options to
purchase shares are outstanding, including currently exercisable
vested options to purchase shares.
15
<PAGE>
PRICE RANGE OF COMMON STOCK
Catalytica's Common Stock is traded on The Nasdaq National Market under the
symbol "CTAL." The following table sets forth the range of high and low
closing prices of Catalytica's Common Stock as reported by The Nasdaq National
Market by quarter for 1995, 1996 and 1997.
<TABLE>
<CAPTION>
HIGH LOW
------- ---------
<S> <C> <C>
1995
First Quarter............................................ $ 4 3/4 $ 2
Second Quarter........................................... 4 5/8 3 1/8
Third Quarter............................................ 5 5/8 3 1/4
Fourth Quarter........................................... 5 5/8 3 3/4
1996
First Quarter............................................ 4 3/8 3 3/4
Second Quarter........................................... 5 3 3/4
Third Quarter............................................ 4 1/8 3 5/8
Fourth Quarter........................................... 4 1/4 3 5/8
1997
First Quarter............................................ 11 3/4 3 56/64
Second Quarter........................................... 13 5/8 7
Third Quarter (through July 28, 1997).................... 14 3/8 11 3/16
</TABLE>
At June 30, 1997, there were approximately 244 holders of record of the
Company's Common Stock. On , 1997, the last reported sale price of the
Common Stock on the Nasdaq National Market was $ per share.
The market price of the Common Stock is likely to be highly volatile.
Factors such as fluctuations in the Company's operating results, the results
of research and development, the effectiveness and commercial viability of
products of Catalytica or its competitors, changes in environmental
regulations, announcements of technological innovations or new products by the
Company or its competitors and changes in recommendations by financial
analysts could have a significant impact on the future price of the Common
Stock. In addition, stock markets have experienced extreme price volatility in
recent years. This volatility has had a substantial effect on the market
prices of securities issued by many companies for reasons that may be
unrelated to the operating performance of the specific companies. These broad
market fluctuations may adversely affect the market price of the Common Stock.
16
<PAGE>
THE WARRANT ISSUANCE
The Company is distributing as soon as practicable after the date of this
Prospectus, at no cost, to each holder of Common Stock of record as of ,
1997 (the "Record Date"), one Warrant for each three shares of Common Stock
held on the Record Date. No Warrants to purchase fractional shares will be
issued, and, accordingly, the number of Warrants to be issued to each
stockholder will be rounded down to the nearest whole Warrant. Each Warrant
entitles the holder to purchase one share of Common Stock at the exercise
price of $4.00 (the "Warrant Price"). The Warrants will expire at 5:00 p.m.
(Pacific time) on , 1997 (the "Warrant Expiration Date"). Warrant holders
may (i) purchase Common Stock through the exercise of their Warrants, (ii)
trade their Warrants or (iii) allow this Warrant to expire unexercised.
THE WARRANTS
Each Warrant will entitle the registered holder to purchase one share of the
Company's Common Stock at the Warrant Price of $4.00 per share during the
day period commencing on the date of this Prospectus. Unless extended by the
Company at its discretion, the Warrants will expire at 5:00 p.m. (Pacific
Time), on the day following the date of this Prospectus. In the event a
holder of Warrants fails to exercise the Warrants prior to their expiration,
the Warrants will expire and the holder thereof will have no further rights
with respect to the Warrants.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise
of such Warrants under an effective registration statement filed with the
Commission and such shares have been qualified for sale or are exempt from
qualification under the securities laws of the state or residence of the
holder of such Warrants. Although the Company intends to have all shares so
qualified for sale in those states where the Warrants are being offered and to
maintain a current prospectus relating thereto until the expiration of the
Warrants, subject to the terms of the Warrant Agreement, there can be no
assurance that it will be able to do so.
A holder of Warrants will not have any rights, privileges or liabilities as
a stockholder of the Company prior to exercise of the Warrants. The Company is
required to keep available a sufficient number of authorized shares of Common
Stock to permit exercise of the Warrants.
The Warrant Price and the number of shares issuable upon exercise of the
Warrants will be subject to adjustment to protect against dilution in the
event of stock dividends, stock splits, combinations, subdivisions and
reclassifications. No assurance can be given that the market price of the
Company's Common Stock will exceed the Warrant Price at any time during the
exercise period.
The Warrants are evidenced by certificates which record holders are
receiving concurrently with copies of this Prospectus.
All commissions, fees and other expenses (including brokerage commissions
and transfer taxes) incurred in connection with the exercise of the Warrants
are the responsibility of the holder of the Warrants and none of such
commissions, fees or expenses shall be paid by the Company.
METHOD OF OFFERING
The Warrant Issuance is being made directly by the Company. The Company will
not pay any underwriting discounts or commissions, finders fees or other
remuneration in connection with any distribution of the Warrants or sales of
the shares of the underlying Common Stock offered hereby, other than the fees
paid to ChaseMellon Shareholder Services, L.L.P. (the "Warrant Agent") as
Warrant Agent. The Company estimates that the expenses of the Warrant Issuance
will be approximately $400,000.
17
<PAGE>
EXERCISE OF WARRANTS AND WARRANT AGENT
Warrant holders may exercise the Warrant by properly completing and signing
the subscription form on the Warrant, including, if required, a signature
guarantee from an eligible institution, and mailing or delivering the Warrant
to the Warrant Agent, together with payment of the aggregate Warrant Price in
full (in United States dollars). A holder may exercise Warrants in whole or in
part, but no Warrants may be exercised for fractional shares.
Warrants and payment should be mailed or delivered by hand or overnight
courier by such holders to:
<TABLE>
<S> <C>
IF BY MAIL: IF BY HAND OR OVERNIGHT COURIER:
ChaseMellon Shareholder Services, ChaseMellon Shareholder Services,
L.L.P. L.L.P.
--------------------------------- ----------------------------------------
--------------------------------- ----------------------------------------
--------------------------------- ----------------------------------------
</TABLE>
The Warrant Agent's telephone number is .
Payment of the Warrant Price may be made by wire transfer, certified or
official bank check, bank draft or money order payable to the order of
ChaseMellon Shareholder Services, L.L.P., as Warrant Agent, for all shares of
Common Stock subscribed for. Wire transfers should be sent to: ChaseMellon
Shareholder Services, ABA: , Account No: , Account Name:
ChaseMellon Shareholder Services.
The Warrant Price will be considered to have been paid only upon clearance
of the wire transfer, certified or official bank check, bank draft or money
order tendered therefor. All funds received by the Warrant Agent from the
exercise of the Warrants will be deposited upon receipt. Pending issuance of
certificates representing shares of Common Stock, funds received for the
exercise of Warrants will be held in a segregated escrow account.
ONCE A HOLDER HAS EXERCISED A WARRANT, THE EXERCISE MAY NOT BE REVOKED.
TO BE ACCEPTED, THE PROPERLY COMPLETED WARRANTS AND PAYMENT WITH RESPECT TO
THE WARRANT PRICE MUST BE RECEIVED BY THE COMPANY BEFORE 5:00 P.M., (PACIFIC
TIME), ON , 1997.
THE INSTRUCTIONS ACCOMPANYING THE WARRANTS SHOULD BE READ CAREFULLY AND
FOLLOWED IN DETAIL. WARRANTS SHOULD BE SENT WITH PAYMENT TO THE WARRANT AGENT.
DO NOT SEND WARRANTS TO THE COMPANY.
Questions relating to the method of exercise and requests for additional
copies of this Prospectus should be directed to the Warrant Agent at
.
EXPIRATION OF WARRANTS
THE WARRANTS WILL EXPIRE AND BECOME VOID AT 5:00 P.M., (PACIFIC TIME), ON
, 1997 (the "Warrant Expiration Date").
Warrants not exercised prior to the Warrant Expiration Date will no longer
be exercisable and will be canceled without further action. The Company will
not be obligated to honor any purported exercise of Warrants received by the
Warrant Agent after the Warrant Expiration Date. The Company reserves the
right, in its sole discretion, to extend the Warrant Expiration Date in order
to deal with any unforeseen contingencies relating to the issuance of the
Warrant Issuance, but does not currently expect to extend the Warrant
Expiration Date.
18
<PAGE>
DELIVERY OF CERTIFICATES
Certificates representing the shares of Common Stock subscribed for will be
issued and delivered as soon as practicable after payment of the Warrant
Price. Holders of Warrants will have no rights as stockholders of the Company
until stock certificates representing the shares of Common Stock subscribed
for are issued to them.
RISK OF DELIVERY AND PAYMENT; DELIVERY BY MAIL
The risk of method of delivery of all documents and payment is on
subscribers, not the Company. If the mail is used, it is recommended that
insured, registered mail be used and that a sufficient number of days be
allowed to ensure delivery to the Warrant Agent before the Warrant Expiration
Date.
TRANSFER OF WARRANTS
The Company has applied to have the Warrants approved for quotation on The
Nasdaq National Market under the Symbol "CTALW."
NOMINEE HOLDERS
Holders on the Record Date who hold shares of Common Stock for the account
of others, such as brokers, trustees or depositories for securities (a
"Nominee Record Date Holder"), should contact the respective beneficial owners
of such shares as soon as possible to ascertain those beneficial owners'
intentions and to obtain instructions and certain beneficial owner
certifications with respect to their Warrants, all as included in the
instructions distributed by Nominee Record Date Holders to beneficial owners.
If a beneficial owner so instructs, the Nominee Record Date Holder should
complete the appropriate subscription form on the Warrants and submit them to
the Warrant Agent with the proper payment. In addition, beneficial owners of
Common Stock or Warrants held through such Nominee Record Date Holder should
contact the Nominee Record Date Holder and request the Nominee Record Date
Holder to effect transactions in accordance with the beneficial owner's
instructions.
PROCEDURES FOR DTC PARTICIPANTS
It is anticipated that the exercise of the Warrants may be effected through
the facilities of The Depository Trust Company ("DTC").
INTERPRETATION
All questions as to the validity, form, eligibility, including time of
receipt, and acceptance of any exercise will be determined by the Company, in
its sole discretion, which determination shall be final and binding. The
Company reserves the absolute right to reject any exercise if it is not in
proper form or if the acceptance thereof or the issuance of Common Stock
pursuant thereto could be deemed unlawful. The Company also reserves the right
to waive any defect with regard to any particular exercise. The Company shall
not be under any duty to give notification of any defects or irregularities in
exercises, nor shall it incur any liability for failure to give such
notification. Warrants will not be deemed to have been exercised until any
such defects or irregularities have been cured or waived within such time as
the Company shall determine. Warrant exercises with defects or irregularities
which have not been cured or waived will be returned by the Company to the
appropriate holder of the Warrants as soon as practicable.
STATE AND FOREIGN SECURITIES LAWS
The Warrants may not be exercised by any person, and neither this Prospectus
nor any Warrants shall constitute an offer to sell or a solicitation of an
offer to purchase any shares of Common Stock in any jurisdiction in which such
transactions would be unlawful. The Company believes that any action required
of the Company
19
<PAGE>
has been taken in all jurisdictions of the United States to permit exercises
of the Warrants and purchases of the Common Stock by the stockholders of the
Company. No action has been taken in any jurisdiction outside the United
States to permit offers and sales of the Warrants or the Common Stock.
Consequently, the Company may reject subscriptions pursuant to the exercise of
Warrants by any holder of Warrants outside the United States, and the Company
may also reject subscriptions from holders in jurisdictions within the United
States if it should later determine that it may not lawfully issue shares to
such holders, even if it could do so by qualifying the shares for sale or by
taking other actions in such jurisdictions.
SUMMARY OF ANTICIPATED EFFECTS OF THE WARRANT ISSUANCE; DILUTION
The Warrant Issuance will have a material effect on the Company and on the
holders of the Company's Common Stock. The Warrant Issuance may result in a
significant dilution of the voting interests of the Company's Common
Stockholders, depending on the participation of the Stockholders in the
Warrant Issuance. Such dilution would reduce a Common Stockholder's ownership
interest in the Company.
The following table sets forth the equity ownership of the Company as of
July 31, 1997 (i) prior to the consummation of the Warrant Issuance and (ii)
after the Warrant Issuance and the repurchase of Class A Common Stock and
Class B Common Stock from MSCP (assuming exercise of all of the Warrants to be
issued hereby).
<TABLE>
<CAPTION>
BEFORE WARRANT AFTER WARRANT
ISSUANCE ISSUANCE
---------------- ----------------
NUMBER OF NUMBER OF
SHARES % SHARES %
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Public......................... 19,905,000 39.9% 26,540,000 51.5%
MSCP........................... 30,000,000 60.1% 25,000,000 48.5%
---------- ----- ---------- -----
Total........................ 49,905,000 100.0% 51,540,000 100.0%
========== ===== ========== =====
</TABLE>
WARRANT EXERCISE
The exercise of the Warrants is subject to the availability of a Warrant
Exercise Prospectus. The Company has agreed to keep the Registration Statement
of which the Warrant Exercise Prospectus forms a part effective in order to
permit such exercises.
20
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the anticipated federal income tax
consequences of the Warrant Issuance. This summary is based on current law, is
for general information only and is not based upon or supported by a ruling of
the Internal Revenue Service (the "Service") or an opinion of counsel. The tax
treatment of a holder of Warrants or Common Stock acquired on the exercise of
a Warrant may vary depending upon his or her particular situation. Certain
holders (including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules
not discussed below. EACH HOLDER SHOULD CONSULT HIS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES TO HIM OF RECEIVING, HOLDING, EXERCISING AND
DISPOSING OF THE WARRANTS OR COMMON STOCK, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL, FOREIGN AND PENDING TAX LAWS.
WARRANTS
Receipt of Warrants. The Company intends to treat the Warrant Issuance as a
nontaxable distribution pursuant to Section 305(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). However, the law applicable to the
receipt of the Warrant Issuance is not entirely clear and the Service may take
the position that the Warrant Issuance constitutes a taxable distribution
under Section 301 of the Internal Revenue Code (the "Code"). In this event, a
holder receiving a Warrant would be considered to have received a distribution
on the date of distribution of the Warrant (the "Distribution Date"), in an
amount equal to the fair market value of the Warrant received. Although the
Company has an accumulated deficit in earnings and profits, to the extent the
Company has current earnings and profits in the taxable year of the Warrant
Issuance, if the distribution were treated as a taxable distribution, the
distribution would be treated first as a dividend taxable as ordinary income,
next as a nontaxable recovery of the adjusted tax basis in the Common Stock
with respect to which the Warrant was distributed and finally as gain from the
sale or exchange of such Common Stock. A holder's tax basis in a Warrant
received in a taxable distribution would equal the fair market value of the
Warrant as of the Distribution Date and the holding period of the Warrant
would commence on the Distribution Date.
Under the Company's intended treatment (i.e., treating the Warrant Issuance
as a nontaxable distribution), if a Warrant is exercised, the tax basis of the
Warrant in the hands of a holder will be determined by allocating the holder's
tax basis in his shares of Common Stock with respect to which the Warrant was
distributed between such shares of Common Stock and the Warrant, in proportion
to their relative fair market values on the Distribution Date. If, however,
the fair market value of the Warrant on the Distribution Date is less than 15%
of the fair market value of the shares of Common Stock with respect to which
the Warrant was distributed, the holder's tax basis in the Warrant will be
deemed to be zero unless the holder affirmatively elects, in accordance with
Treasury Regulations, to apportion his or her tax basis in accordance with the
preceding sentence. The holding period of a Warrant will include the holding
period for the shares of Common Stock with respect to which the Warrant was
distributed.
Exercise of Warrants. No gain or loss will be recognized by a holder of
Warrants upon exercise of the Warrants for cash. The adjusted tax basis of a
holder of Common Stock acquired upon exercise of Warrants will be equal to the
sum of the holder's adjusted tax basis in the exercised Warrants and the
Warrant Price. The holding period for Common Stock acquired upon exercise of
Warrants will commence on the date of such exercise.
Disposition of Warrants. The sale or other disposition of Warrants will
result in the recognition of gain or loss by the holder of such Warrant in an
amount equal to the difference between the amount realized and the holder's
adjusted tax basis in the Warrant (determined as discussed above). Gain or
loss will be capital gain or loss if the Warrant was held as a capital asset,
and will be long-term capital gain or loss if the Warrant has a holding period
for tax purposes of more than one year. As discussed above, the date on which
the holding period for the Warrant commences will depend on whether the
Warrant is treated as a non-taxable distribution or as a distribution taxable
under Section 301 of the Code.
21
<PAGE>
Expiration of Warrants Without Exercise. A holder of a Warrant who allows it
to expire without exercise may not allocate any tax basis to the unexercised
Warrant and will therefore not sustain a loss because of its expiration.
COMMON STOCK
Disposition of Common Stock. The sale or other disposition of Common Stock
acquired on exercise of a Warrant will result in the recognition of gain or
loss by the holder of such Common Stock in an amount equal to the difference
between the amount realized and the holder's adjusted tax basis in the Common
Stock. Gain or loss will be capital gain or loss if the Common Stock was held
as a capital asset, and will be long-term capital gain or loss if the Common
Stock has a holding period for tax purposes of more than one year. The holding
period of shares of Common Stock acquired by exercise of the Warrants
commences on the date such Warrants are exercised.
DESCRIPTION OF CAPITAL STOCK
As of July 31, 1997, the authorized capital stock of the Company consists of
120,000,000 shares of Common Stock, of which 73,000,000 have been designated
Common Stock, $0.001 par value, 30,000,000 have been designated Class A Common
Stock, $0.001 par value, and 17,000,000 have been designated Class B Common
Stock, $0.001 par value, and 5,000,000 shares of Preferred Stock, $0.001 par
value.
COMMON STOCK
As of July 31, 1997, there were 49,905,790 shares of Common Stock
outstanding held of record by approximately stockholders. Holders of Common
Stock are entitled to one vote per share on all matters to be voted upon by
the stockholders except that, upon giving of a notice required by law,
stockholders may cumulate their votes in elections of directors. Subject to
preferences that may be applicable to the Class A Common Stock and Class B
Common Stock described below and any Preferred Stock that may be issued in the
future, the holders of Common Stock are entitled to receive such lawful
dividends as may be declared by the Board of Directors. In the event of a
liquidation, dissolution or winding up of the Company, and subject to the
prior rights of holders of the Class A Common Stock and Class B Common Stock
described below and any outstanding shares of Preferred Stock, the holders of
shares of Common Stock shall be entitled to receive pro rata all of the
remaining assets of the Company available for distribution to its
stockholders. There are no redemption or sinking fund provisions applicable to
the Common Stock. All outstanding shares of Common Stock are fully paid and
non-assessable, and the shares of Common Stock to be outstanding upon exercise
of the Warrants will be fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock in one or more series and to fix the rights, qualifications,
preferences, privileges, limitations and restrictions of each such series,
including dividend rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any
series or the designation of such series, without further vote or action by
the stockholders. Although it presently has no intention to do so, the Board
of Directors, without stockholder approval, can issue Preferred Stock with
voting and conversion rights which could adversely affect the voting power of
the holders of Common Stock. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of the
Company. There are no shares of Preferred Stock outstanding and the Company
has no present plans to issue any additional Preferred Stock.
CLASS A COMMON STOCK
As of July 31, 1997, there were 13,270,000 shares of Class A Common Stock
outstanding held of record by MSCP. The Class A Common Stock has the following
rights and preferences:
22
<PAGE>
Voting. The Class A Common Stock votes together with the Common Stock as a
single class, except that so long as MSCP owns in the aggregate not less than
20% of the Company's outstanding Common Stock, a separate class vote of the
Class A Common Stock will be required for (i) the issuance of any additional
capital stock that ranks senior or pari passu to the Class A Common Stock or
Class B Common Stock, (ii) any changes to the Company's Certificate of
Incorporation that would adversely affect the rights of the Class A Common
Stock or Class B Common Stock, and (iii) any merger or consolidation of the
Company that has an effect on the Class A Common Stock or Class B Common Stock
substantially similar to (i) or (ii) above. In addition, the approval of a
majority of the outstanding shares of Class A Common Stock will be required
before the Company can enter into any arrangements which would affect the
capital structure or financing of the operations of the Company in excess of
$5,000,000 annually, other than an extension or renewal of any existing
indebtedness, (b) to authorize changes to the aggregate cash or equity
compensation of senior corporate officers of the Company and its subsidiaries,
or (c) to merge or consolidate the Company with or into another corporation or
the sale, transfer or lease all or substantially all of the assets of the
Company.
Dividends. There shall be no dividends on the Class A Common Stock. If a
dividend is paid on the Common Stock, the holders of the Class A Common Stock
shall be entitled to receive an amount equal to the amount which would have
been paid had the Class A Common Stock been converted to Common Stock in
accordance with its terms.
Catalytica has never declared or paid cash dividends on its capital stock.
The Company currently intends to retain its earnings to finance the operation
and expansion of its business and therefore does not expect to pay any cash
dividends in the foreseeable future.
Conversion. Each share of Class A Common Stock may be converted at the
option of the holder into shares of Common Stock at the then effective
conversion price. Each share of Class A Common Stock shall automatically
convert into Common Stock (i) upon any transfer by MSCP, including any
distribution to its partners or affiliated entities, or (ii) if less than 10%
of the shares of Class A Common Stock initially issued are outstanding. The
conversion price initially shall be $4.00 per share and shall be subject to
adjustment in certain cases as described below. The Company may issue up to
$25,000,000 of aggregate amount of capital stock or warrants to stockholders
of the Company prior to May 31, 1998 without triggering an adjustment to the
conversion price of the Class A Common Stock. In addition, the Company may
issue in the aggregate up to an additional $2,500,000 of capital stock or
warrants to stockholders of the Company without triggering an adjustment to
the conversion price of the Class A Common Stock provided that such additional
capital stock is issued in connection with the exercise of the warrants from
the Warrant Issuance.
Liquidation Preference. The liquidation preference of the Class A Common
Stock ranks senior to all other common stock and preferred stock at any time
outstanding of the Company unless agreed to by MSCP. The liquidation
preference of the Class A Common Stock will be equal to the greater of (i)
$4.00 per share plus any accrued and unpaid dividends, (the "Liquidation
Preference") and (ii) the amount that holders thereof would have received in
such liquidation had the Class A Common Stock been converted to Common Stock
in accordance with its terms. For purposes of this provision, any merger,
consolidation or other business combination as a result of which the
stockholders of the Company immediately before such transaction own less than
50% of the total voting power of the surviving corporation or the sale of all
or substantially all of the assets of the Company shall in each case be deemed
a liquidation of the Company.
Other Terms. Appropriate adjustments shall be made to the liquidation and
conversion rights of the Class A Common Stock in cases of (a) stock splits,
reclassifications, stock dividends, rights offerings and similar events to
existing holders of Common Stock, and (b) in the event of issuance of Common
Stock or securities which are convertible into or which provide the right to
purchase Common Stock at less than fair market value at the time of issuance,
except in the case of shares or options issued or provided (i) upon conversion
of the Class A Common Stock or Class B Common Stock; (ii) to employees,
officers, directors and consultants of the Company pursuant to any employee
stock incentive plans or agreements; (iii) as a dividend or distribution on
the Class A Common Stock or Class B Common Stock; (iv) in connection with the
Acquisition of the assets or voting
23
<PAGE>
securities of another corporation or entity; (v) upon exercise of warrants
issued to Glaxo Wellcome in connection with the Acquisition; (vi) upon
issuance of up to $25,000,000 aggregate amount of capital stock and/or
warrants of the Company to stockholders of the Company at any time prior to
May 31, 1998; and (vii) in an underwritten public offering that results in
gross proceeds in excess of $5.0 million to the Company.
CLASS B COMMON STOCK
As of July 31, 1997 there were 16,730,000 shares of Class B Common Stock
outstanding, which were held of record by MSCP.
The Class B Common Stock has the same powers, preferences and rights
described above as the Class A Common Stock, except that the Class B Common
Stock is convertible into Class A Common Stock, has no voting rights (except
as required by Delaware law) and has no right to vote for the election of
directors. The shares of Class B Common Stock will, upon any transfer of such
shares by MSCP, be automatically converted into a like number of shares of
Common Stock, subject to adjustment upon certain events with respect to the
Common Stock. The shares of Class B Common Stock are convertible at the option
of MSCP into Common Stock or Class A Common Stock so long as such conversion
results in MSCP holding 40% or less of the Company's outstanding voting
securities.
REGISTRATION RIGHTS
As of July 31, 1997, the holders of approximately shares of Common Stock
are entitled to certain rights with respect to the registration of such shares
under the Securities Act of 1933, as amended (the "Securities Act"). Under the
terms of an agreement between the Company and such holders, holders of at
least 50% of the registrable shares may request, subject to certain
limitations, that the Company use it best efforts to register the securities
for public resale. The holders may request such registration on no more than
five occasions and the Company may, upon giving notice to the holders, defer
such registration for up to six months after the effective date of any public
offering. In addition, under the terms of such agreement, if the Company
proposes to register any of its securities under the Securities Act, either
for its own account or the account of other security holders exercising
registration rights, the holders are entitled to notice of such registration
and are entitled to include shares of Common Stock therein; provided, among
other conditions, that the underwriters have the right to limit the number of
shares included in such registration. In addition, the stockholders holding
these rights may require the Company to file registration statements on Form
S-3 under the Securities Act with respect to such shares so long as the
anticipated aggregate price to the public of any such registration statement
would exceed $500,000. The Company is required to use its best efforts to
effect such registration, subject to certain conditions and limitations,
including, but not limited to, applicable securities laws.
In addition, MSCP has the right, at any time after July 1, 1998, to request
the Company to effect a registration (a "Registration Request") of shares of
Common Stock issuable upon conversion of the Class A Common Stock and Class B
Common Stock held by it with an aggregate offering price of at least $15
million. MSCP is entitled to four Registration Requests. Registration Requests
may not be made within six months of any other Registration Request. In
addition, in the event the Company proposes to register any of its securities
for its own account or the account of any of its stockholders (other than
certain registrations relating solely to a stock option or other similar
employee benefit plan), MSCP will have the right, upon a timely request and
subject to a right of priority in favor of the Company, to have the Common
Stock issuable upon conversion of the Class A Common Stock and Class B Common
Stock included in such registration. All expenses of registration will be
borne by the Company, but any underwriters' fees, discounts or commissions
will be borne by MSCP.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Common Stock is
ChaseMellon Shareholder Services, L.L.C.
24
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
Common Stock issuable upon exercise of the Warrants will be passed upon for
the Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California.
EXPERTS
The Financial Statements of the Company at December 31, 1994, 1995 and 1996,
and for each of the three years in the period ended December 31, 1996
incorporated by reference in this Prospectus and the Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as stated in
their report thereon appearing elsewhere herein and in the Registration
Statement, and are included in reliance upon such reports upon the authority
of such firm as experts in accounting and auditing.
25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 4
Risk Factors............................................................... 6
Use of Proceeds............................................................ 14
Capitalization............................................................. 15
Price Range of Common Stock................................................ 16
The Warrant Issuance....................................................... 17
Certain Federal Income Tax Consequences.................................... 21
Description of Capital Stock............................................... 22
Legal Matters.............................................................. 25
Experts.................................................................... 25
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCK PURCHASE WARRANTS
CATALYTICA, INC.
-----------------
PROSPECTUS
-----------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[FORM OF WARRANT EXERCISE PROSPECTUS]
SUBJECT TO COMPLETION, DATED JULY 31, 1997
CATALYTICA, INC.
SHARES OF COMMON STOCK
This Prospectus relates to shares of Common Stock, par value
$0.001 per share (the "Common Stock"), of Catalytica, Inc. (the "Company")
issuable upon the exercise of Common Stock Purchase Warrants (the
"Warrants") issued by the Company in connection with a Warrant Issuance
on , 1997. The Common Stock is quoted on The Nasdaq National Market under
the symbol "CTAL." On , 1997, the closing price of the Common Stock was $
per share.
-----------
THE COMMON STOCK OFFERED HEREBY OFFERS A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................... $4.00 none $4.00
- --------------------------------------------------------------------------------
Total (3)........................... $ none $
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
(1) The Shares are being offered and sold directly by the Company, and no
commissions or other remuneration is intended to be paid to any person for
soliciting purchases of the shares in this Offering.
(2) Before deducting expenses payable by the Company estimated at $400,000.
(3) Assumes the exercise of all Warrants to be issued hereby.
-----------
The date of this prospectus is , 1997
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 4
Risk Factors............................................................... 6
Use of Proceeds............................................................ 14
Capitalization............................................................. 15
Price Range of Common Stock................................................ 16
The Warrant Issuance....................................................... 17
Certain Federal Income Tax Consequences.................................... 21
Description of Capital Stock............................................... 22
Legal Matters.............................................................. 25
Experts.................................................................... 25
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES OF COMMON STOCK
CATALYTICA, INC.
-----------------
PROSPECTUS
-----------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant, in
connection with the offering.
<TABLE>
<CAPTION>
ITEM
----
<S> <C>
Registration fee.................................................. $ 8,043
Nasdaq application fee............................................ 54,000
Blue Sky fees and expenses........................................ 5,000
Printing and engraving expenses................................... 150,000
Legal fees and expenses........................................... 56,000
Accounting fees and expense....................................... 25,000
Transfer Agent and Registrar fees................................. 5,000
Warrant Agent fees................................................ 5,000
Miscellaneous..................................................... 91,957
--------
Total........................................................... $400,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a corporation
to grant indemnity to directors and officers in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities
Act, Article Ninth of the Registrant's Amended and Restated Certificate of
Incorporation (Exhibit 3.1 hereto;) and Article VI, Sections 6.1 and 6.2 of
the Registrant's Bylaws (Exhibit 3.2 hereto) provide for indemnification of
its directors, officers, employees and other agents to the maximum extent
permitted by the Delaware Corporation Law. In addition, the Registrant has
entered into Indemnification Agreements (Exhibit 10.11 hereto) with its
officers and directors.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1* Form of Registrant's Common Stock certificate.
4.2 Form of Registrant's Common Stock Purchase Warrant.
4.3 Form of Warrant Agreement between the Registrant and Chase Mellon
Shareholder Services, LLC.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (See page II-3).
</TABLE>
- --------
* Incorporated by reference to the Exhibit filed with the Company's
Registration Statement on Form S-1 (Registration Statement No. 33-55696).
** To be filed by amendment.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred
II-1
<PAGE>
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) for the purposes of determining any liability under the Securities
Act of 1993, the information omitted form the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) for the purpose of determining any liability under the Security Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IS HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF MOUNTAIN VIEW, STATE OF CALIFORNIA,
ON THE 30TH DAY OF JULY, 1997.
CATALYTICA, INC.
/s/ Ricardo B. Levy
By __________________________________
Ricardo B. Levy
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, THAT EACH PERSON WHOSE SIGNATURE APPEARS
BELOW CONSTITUTES AND APPOINTS RICARDO B. LEVY AND LAWRENCE W. BRISCOE AND
EACH OF THEM, HIS ATTORNEYS-IN-FACT, EACH WITH THE POWER OF SUBSTITUTION, FOR
HIM AND IN HIS NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY
AND ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT, AND TO SIGN ANY REGISTRATION STATEMENT FOR THE SAME OFFERING
COVERED BY THIS REGISTRATION STATEMENT THAT IS TO BE EFFECTIVE UPON FILING
PURSUANT TO RULE 462(B) PROMULGATED UNDER THE SECURITIES ACT OF 1933, AND ALL
POST-EFFECTIVE AMENDMENTS THERETO, AND TO FILE THE SAME, WITH ALL EXHIBITS
THERETO IN ALL DOCUMENTS IN CONNECTION THEREWITH, WITH THE SECURITIES AND
EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND AGENTS, AND EACH
OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND EVERY ACT AND
THING REQUISITE AND NECESSARY TO BE DONE IN AND ABOUT THE PREMISES, AS FULLY
TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY
RATIFYING AND CONFIRMING ALL THAT SUCH ATTORNEYS-IN-FACT AND AGENTS OR ANY OF
THEM, OR HIS OR THEIR SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO
BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED AS OF THE 30TH DAY OF JULY, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ Ricardo B. Levy President, Chief Executive
___________________________________________ Officer (Principal Executive
Ricardo B. Levy Officer)
and Director
/s/ James A. Cusumano Chairman of the Board and Chief
___________________________________________ Technical Officer
James A. Cusumano
/s/ Lawrence W. Briscoe Vice President, Finance and
___________________________________________ Administration, and Chief
Lawrence W. Briscoe Financial Officer (Principal
Accounting and Financial Officer)
/s/ Utz Felcht Director
___________________________________________
Utz Felcht
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ Richard Fleming Director
___________________________________________
Richard Fleming
/s/ Ernest Mario Director
___________________________________________
Ernest Mario
/s/ Yoshindo Tomoi Director
___________________________________________
Yoshindo Tomoi
/s/ John A. Urquhart Director
___________________________________________
John A. Urquhart
</TABLE>
II-4
<PAGE>
CATALYTICA, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
------- ----------- ----
<C> <S> <C>
4.1* Form of Registrant's Common Stock certificate.
4.2 Form of Registrant's Common Stock Purchase Warrant.
4.3 Form of Warrant Agreement between the Registrant and Chase
Mellon Shareholder Services, LLC.
5.1** Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (See page II-3).
</TABLE>
- --------
* Incorporated by reference to the Exhibit filed with the Company's
Registration Statement on Form S-1 (Registration Statement No. 33-55696).
** To be filed by amendment.
II-5
<PAGE>
EXHIBIT 4.2
[NUMBER FIELD] [WARRANT FIELD]
CATALYTICA, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
VOID AFTER _______________, 1997
COMMON STOCK PURCHASE WARRANT CERTIFICATE
THIS CERTIFIES THAT, for value received,
[NAME FIELD]
or registered assigns (the "Registered Holder"), is the owner of the number of
Common Stock Purchase Warrants (the "Warrants") set forth above. Each Warrant
entitles the Registered Holder to purchase, subject to the terms and conditions
set forth in this certificate and the Warrant Agreement (as hereinafter
defined), one fully paid and nonassessable share of Common Stock, $0.001 par
value per share (the "Common Stock"), of Catalytica, Inc., a Delaware
Corporation (the "Corporation"), during the ninety day period commencing August
__, 1997 and ending at 5:00 p.m. Pacific Time on ___________, 1997, upon the
presentation and surrender of this Warrant Certificate with the Election to
Purchase Form on the reverse hereof duly executed, at the corporate office of
[ChaseMellon Shareholder Services, L.L.P.] as Warrant Agent, or its successor
(the "Warrant Agent"), accompanied by payment of $4.00 per Warrant (the "Warrant
Price") and any and all applicable taxes due in connection with the exercise of
the Warrant in lawful money of the United States of America in cash or by
official bank or certified check made payable to the Warrant Agent.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and provisions set
forth in the Warrant Agreement ("the Warrant Agreement"), dated as of August __,
1997, by and among the Corporation and the Warrant Agent. Reference is hereby
made to said Warrant Agreement for a more complete statement of the rights and
limitations of rights of the Registered Holders hereof, the rights and duties of
the Warrant Agent and the rights and obligations of the Corporation thereunder.
Copies of said Warrant Agreement are on file at the office of the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Warrant Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment together with any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant
<PAGE>
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, subject to the limitations provided in
the Warrant Agreement.
If this Warrant Certificate shall be surrendered for exercise within any
period during which the transfer books for the Common Stock or other securities
purchasable upon the exercise of this Warrant Certificate are closed for any
purpose, the Transfer Agent shall not be required to make delivery of
certificates for the securities purchasable upon such exercise until the date of
the reopening of said transfer books.
The Corporation shall not be obligated to deliver any securities pursuant
to the exercise or sale of this Warrant Certificate unless a registration
statement under the Securities Act of 1933, as amended, is effective with
respect to such securities. The Corporation has filed a registration statement
with the Securities and Exchange Commission and has agreed that it will use its
best efforts to keep such registration statement effective while any one of the
Warrants are outstanding. This Warrant Certificate shall not be exercised or
sold by a Registered Holder in any state where such exercise would be unlawful.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Corporation, except as provided in the Warrant Agreement.
Prior to due presentment for registration of transfer of this Warrant
Certificate, the Corporation and the Warrant Agent may deem and treat the
Registered Holder as the absolute owner hereof and of each Warrant represented
hereby (notwithstanding any notations of ownership or writing hereon made by
anyone other than a duly authorized officer of the Corporation or the Warrant
Agent), for all purposes and shall not be affected by any notice to the
contrary.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Delaware.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Corporation has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated:
COUNTERSIGNED ATTEST: By:
AS WARRANT AGENT
BY:
AUTHORIZED OFFICER AUTHORIZED OFFICER
<PAGE>
ELECTION TO PURCHASE FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO EXERCISE WARRANTS
To: Catalytica, Inc.
c/o: ChaseMellon Shareholder Services, L.L.P.
50 California Street
10th Floor
San Francisco, California 94111
The undersigned Registered Holder hereby irrevocably elects to exercise
_________________________ Warrants represented by this Warrant Certificate, and
to purchase the securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
______________________________
________________________________________________________________________________
(Please Print or Typewrite)
and be delivered to_____________________________________________________________
(NAME)
at______________________________________________________________________________
(Street Address) (City) (State) (Zip Code)
and, if said number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registred in the name of, and delivered to, the undersigned at the
address stated below.
Dated:________________, 19____ Signature:____________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate or with the name of the
Name:_________________________ assignee appearing in the assignment
(Please Print or Typrwrite) form below in every particular
without alteration or enlargement or
any change whatever.
Address:______________________ *Signature Guaranteed:________________________
(Street)
______________________________ ____________________________________
____________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
ASSIGNMENT
TO BE EXECUTED BY THE REGISTERED HOLDER IN ORDER TO ASSIGN WARRANTS
For value received _______________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
______________________________
________________________________________________________________________________
Please Print or Typewrite name and address including postal zip code of
assignee.
and be delivered to_____________________________________________________________
________________________________________________________________________________
____________________________________________________________ (________) Warrants
represented by the within Warrant Certificate, together with all right, title
and interest therein, and do hereby irrevocably constitute and
appoint ______________________________________________________________ attorney,
to transfer said Warrant Certificate on the books of the within named
Corporation, with full power of substitution in the premises.
Dated____________________, 19____
Signature:____________________________________
Note: The above signature must
correspond with the name as written
upon the face of this Warrant
Certificate in every particular
without alteration or enlargement or
any change whatever.
*Signature Guaranteed:________________________
* In case of assignment, or if the Common Stock issued upon exercise is to be
registered in the name of a person other than the holder, the holder's signature
must be guaranteed by a commercial bank, trust company or an NASD member firm.
<PAGE>
EXHIBIT 4.3
WARRANT AGREEMENT
-----------------
AGREEMENT, dated as of August __, 1997, by and among CATALYTICA, INC., a
Delaware corporation (the "Corporation"), and CHASEMELLON SHAREHOLDER SERVICES,
L.L.P., a [New Jersey L.L.P.], as Warrant Agent (the "Warrant Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Corporation has declared a dividend in the form of a warrant
to be exercisable for a period of ninety days from the issuance thereof (the
"Initial Warrant Exercise Date"), to purchase one share of the Corporation's
Common Stock at $4.00 per share (the "Warrant Price") for every three shares of
Common Stock held by a stockholder on [__________, 1997]; and
WHEREAS, the Corporation has filed with the Securities Exchange Commission
a Registration Statement, No. _____ on Form S-3 ("Registration Statement") for
the registration, under the Securities Act of 1933, as amended, of among others,
the Warrants and the Common Stock issuable upon exercise of the Warrants; and
WHEREAS, the Corporation desires the Warrant Agent to act on behalf of the
Corporation, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, and exchange of the Warrants, the issuance of
certificates representing the Warrants, the exercise of the Warrants, and the
rights of the holders thereof; and
WHEREAS, all acts and things have been done and performed which are
necessary to make the Warrants, when executed on behalf of the Corporation and
countersigned by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligations of the Corporation, and to authorize the
execution and delivery of this Agreement;
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificates representing the Warrants and the
respective rights and obligations thereunder of the Corporation, the holders of
certificates representing the Warrants and the Warrant Agent, the Parties hereto
agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have
-----------
the following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the authorized 120,000,000 shares of $0.001
par value per share Common Stock of the Corporation.
(b) "Corporate Office" shall mean the office of the Warrant Agent (or its
successor) at which at any particular time its principal business shall be
administered, which office is located on the date hereof at [50 California
Street, 10th Floor, San Francisco, California].
<PAGE>
(c) "Exercise Date" shall mean, as to any Warrant, the date on which the
Warrant Agent shall have received both (a) the Warrant Certificate representing
such Warrant, with the Election to Purchase Form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing, and (b)
payment in cash, by wire transfer or by official bank or certified check made
payable to the Warrant Agent, of an amount in lawful money of the United States
of America equal to the applicable Warrant Price.
(d) "Initial Warrant Exercise Date" shall mean, as to each Warrant,
__________, 1997.
(e) "Registered Holder" shall mean the person in whose name any
certificate representing a Warrant or Warrants shall be registered on the books
maintained by the Warrant Agent pursuant to Section 6.
(f) "Transfer Agent" shall mean ChaseMellon Shareholder Services, L.L.P.
as the Corporation's transfer agent, or its authorized successor, as such.
(g) "Warrant Expiration Date" shall mean 5:00 p.m. (Pacific time) on
November __, 1997; provided that if such date shall in the State of California
be a holiday or a day on which banks are authorized to close, then 5:00 pm.
(Pacific time) on the next following day which in the State of California is not
a holiday or a day on which banks are authorized to close. Upon notice to all
Registered Holders, the Corporation shall have the right to extend the Warrant
Expiration Date.
(h) "Warrant Price" shall mean the price to be paid upon exercise of each
Warrant in accordance with the terms hereof, which price shall be $4.00 during
the _____ day period commencing __________, 1997 and ending at 5:00 p.m. Pacific
Time on __________, 1997, subject to adjustment from time to time pursuant to
the provisions of Section 8 hereof, and subject to the Corporation's right to
reduce the Warrant Price upon notice to all Registered Holders.
SECTION 2. Warrants and Issuance of Warrant Certificates.
---------------------------------------------
(a) Each Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase one share of Common
Stock upon the exercise thereof, in accordance with the terms hereof, subject to
modification and adjustment as provided in Section 8.
(b) From time to time, up to the Warrant Expiration Date, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations upon the exercise of Warrants in accordance with this Agreement.
(c) From time to time, up to the Warrant Expiration Date, the Warrant
Agent shall countersign and deliver Warrant Certificates in required whole
number denominations to the Persons entitled thereto in connection with any
transfer or exchange permitted under this Agreement; provided that no Warrant
Certificates shall be issued except (i) those initially issued hereunder, (ii)
those issued on or after the Initial Warrant Exercise Date, upon the exercise of
fewer than all
-2-
<PAGE>
Warrants represented by any Warrant Certificate, to evidence any unexercised
Warrants held by the exercising Registered Holder, (iii) those issued upon any
transfer or exchange pursuant to Section 6; (iv) those issued in replacement of
lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7;
and (v) at the option of the Corporation, in such form as may be approved by its
Board of Directors, to reflect any adjustment or change in the Warrant Price or
the number of shares of Common Stock purchasable upon exercise of the Warrants
made pursuant to Section 8 hereof.
SECTION 3. Form and Execution of Warrant Certificates.
------------------------------------------
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Corporation may deem
appropriate and as are not inconsistent with the provisions of this Agreement or
as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Warrants may be listed, or to conform to usage. The Warrant Certificates
shall be dated the date of issuance thereof (whether upon initial issuance,
transfer, exchange at in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrants shall be numbered
serially with the letter W on the Warrants.
(b) Warrant Certificates shall be executed on behalf of the Corporation by
its Chairman of the Board, President or any Vice President and by its Secretary
or an Assistant Secretary, by manual signatures or by facsimile signatures
printed thereon, and shall have imprinted thereon a facsimile of the
Corporation's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Corporation who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Corporation before the date
of issuance of the Warrant Certificates or before countersignature by the
Warrant Agent and issue and delivery thereof, such Warrant Certificates may
nevertheless be countersigned by the Warrant Agent, issued and delivered with
the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be such Officer of the Corporation. After
countersignature by the Warrant Agent, Warrant Certificates shall be delivered
by the Warrant Agent to the Registered Holder without further action by the
Corporation, except as otherwise provided by Section 4(a) hereof.
SECTION 4. Exercise.
--------
(a) Each Warrant may be exercised by the Registered Holder thereof at any
time on or after the Initial Warrant Exercise Date, but not after the Warrant
Expiration Date, upon the terms and subject to the conditions set forth herein
and in the applicable Warrant Certificate. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such exercise
shall be treated for all purposes as the holder upon exercise thereof as of the
close at business on the Exercise Date. As soon as practicable on or after the
Exercise Date the Warrant Agent shall deposit the proceeds
-3-
<PAGE>
received from the exercise of a Warrant and shall notify the Corporation in
writing of the exercise of such Warrant. Promptly following, and in any event
within five days after the date of such notice from the Warrant Agent, the
Warrant Agent, on behalf of the Corporation, shall cause to be issued and
delivered by the Transfer Agent, to the person or persons entitled to receive
the same, a certificate or certificates for the securities deliverable upon such
exercise, (plus a warrant Certificate for any remaining unexercised Warrants of
the Registered Holder) unless prior to the date of issuance of such certificates
the Corporation shall instruct the Warrant Agent to refrain from causing such
issuance of certificates pending clearance of checks received in payment of the
Warrant Price pursuant to such Warrants. Upon the exercise of any Warrant and
clearance of the funds received, the Warrant Agent shall promptly, and in no
event later than three business days following the day in which the funds clear,
remit the payment received for the Warrant to the Corporation or as the
Corporation may direct in writing.
SECTION 5. Reservation of Shares; Registration of Warrants; Listing of
-----------------------------------------------------------
Securities Payment of Taxes; etc.
---------------------------------
(a) The Corporation covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Corporation
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of issuance and delivery against payment
therefor of the requisite Warrant Price, be duly and validly issued, fully paid,
nonassessable and free from all taxes liens and charges with respect to the
issue thereof (other than those which the Corporation shall promptly pay or
discharge) and that upon issuance such shares shall be listed on each national
securities exchange, if any, on which the other shares of outstanding Common
Stock of the Corporation are then listed.
(b) The Corporation covenants that if the issuance of any Warrants
hereunder require registration with, or approval of, any governmental authority
under any federal securities law before such Warrants may be validly delivered
upon such issuance, then the Corporation will in good faith and as expeditiously
as reasonably possible, endeavor to secure such registration or approval. The
Corporation will use reasonable efforts to obtain appropriate approvals or
registrations with respect to such Warrants under the "blue sky" securities laws
of those states with respect to which the Corporation obtained a qualification
in connection with its offering.
(c) The Corporation covenants that if any securities to be reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Corporation will in good faith and as expeditiously as reasonably possible,
endeavor to secure such registration or approval. The Corporation will use
reasonable efforts to obtain appropriate approvals or registrations with respect
to such securities under the "blue sky" securities laws of those states with
respect to which the Corporation obtained a qualification in connection with its
offering. However, Warrants may not be exercised or sold by, or shares of
Common Stock issued to, any Registered Holder in any state in which such
exercise or sale would be unlawful.
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<PAGE>
(d) The Corporation shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
(e) The Warrant Agent is hereby irrevocably authorized to requisition the
Corporation's Transfer Agent from time to time for certificates representing
shares of Common Stock required upon exercise of the Warrants, and the
Corporation will authorize the Transfer Agent to comply with all such proper
requisitions. The Corporation will file with the Warrant Agent a statement
setting forth the name and address of the Transfer Agent of the Corporation for
shares of Common Stock issuable upon exercise of the Warrants, unless the
Warrant Agent and the Transfer Agent are the same entity.
SECTION 6. Exchange and Registration of Transfer.
-------------------------------------
(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants of the same class or may be
transferred in whole or in part. Warrant Certificates to be exchanged shall be
surrendered to the Warrant Agent at its Corporate Office, and upon satisfaction
of the terms and provisions hereof, the Corporation shall execute and the
Warrant Agent shall countersign, issue and deliver in exchange therefor the
Warrant Certificate or Certificates which the Registered Holder making the
exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Corporation shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants of the same
class.
(c) With respect to all Warrant Certificates presented for registration of
transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the
Corporation and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent against a
Registered Holder for any exchange or registration of transfer of Warrant
Certificates. In addition, the Corporation may require payment by such holder
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.
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<PAGE>
(e) All Warrant Certificates surrendered for exercise or for exchange in
case of mutilated Warrant Certificates shall be promptly canceled by the Warrant
Agent and thereafter retained by the Warrant Agent until termination of this
Agreement or resignation as Warrant Agent, or disposed of or destroyed, at the
direction of the Corporation.
(f) Prior to due presentment for registration of transfer thereof, the
Corporation and the Warrant Agent may deem and treat the Registered Holder of
any Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Corporation
or the Warrant Agent) for all purposes and shall not be affected by any notice
to the contrary.
SECTION 7. Loss or Mutilation. Upon receipt by the Corporation and the
------------------
Warrant Agent of evidence satisfactory to them of the ownership of and loss,
theft, destruction or mutilation of any Warrant Certificate and (in case of
loss, theft or destruction) of indemnity satisfactory to them, and (in the case
of mutilation) upon surrender and cancellation thereof, the Corporation shall
execute and the Warrant Agent shall (in the absence of notice to the Corporation
and/or Warrant Agent that the Warrant Certificate has been acquired by a
bonafide purchaser) countersign and deliver to the Registered Holder in lieu
thereof a new Warrant Certificate of like tenor representing an equal aggregate
number of Warrants. Applicants for a substitute Warrant Certificate shall
comply with such other reasonable regulations, provide such reasonable
indemnification and pay such other reasonable charges as the Warrant Agent or
the Corporation may prescribe.
SECTION 8. Adjustment of Exercise Price and Number of Shares of Common
-----------------------------------------------------------
Stock or Warrants.
-----------------
(a) Subject to the exceptions referred to in Section 8(g) below, in the
event the Corporation shall, at any time or from time to time after the date
hereof, issue any shares of Common Stock as a stock dividend to the holders of
Common Stock, or subdivide or combine the outstanding shares of Common Stock
into a greater or lesser number of shares (any such sale, issuance, subdivision
or combination being herein called a "Change of Shares"), then, and thereafter
upon each further Change of Shares, the applicable Warrant Price in effect
immediately prior to such Change of Shares shall be changed to a price
(including any applicable fraction of a cent) determined by multiplying the
Warrant Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of (a) the total number of shares of Common Stock
outstanding immediately prior to such Change of Shares and (b) the number of
shares of Common Stock which the aggregate consideration received by the
Corporation upon such sale, issuance, subdivision or combination (determined in
accordance with subsection (e) below) could have purchased at the then current
Warrant Price, and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such Change of Shares.
Upon each adjustment of the applicable Warrant Price Pursuant to this
Section 8, the total number of shares of Common Stock purchasable upon the
exercise of each Warrant shall (subject to the provisions contained in Section
8(b) hereof) be such number of shares (calculated to the nearest hundredth)
purchasable at the applicable Warrant Price immediately prior to such adjustment
-6-
<PAGE>
multiplied by a fraction, the numerator of which shall be the applicable Warrant
Price in effect immediately prior to such adjustment and the denominator of
which shall be the applicable Warrant Price in effect immediately after such
adjustment.
(b) In case of any reclassification or capital reorganization of
outstanding shares of Common Stock, or in case of any consolidation or merger of
the Corporation with or into another corporation (other than a consolidation or
merger in which the Corporation is the continuing corporation and which does not
result in any reclassification or capital reorganization of outstanding shares
of Common Stock) , or in case of any sale or conveyance to another corporation
of the property of the Corporation as, or substantially as, an entirety (other
than a sale/leaseback, mortgage or other financing transaction) , the
Corporation shall cause effective provision to be made so that each holder of a
Warrant then outstanding shall, in substitution for all rights theretofore
represented by such Warrant, have the right thereafter, by exercising such
Warrant, to purchase the kind and number of shares of stock or other securities
or property (including cash) receivable upon such reclassification or capital
reorganization, consolidation, merger, sale or conveyance by a holder of the
number of shares of Common Stock that might have been purchased upon exercise of
such Warrant, immediately prior to such reclassification or capital
reorganization, consolidation, merger, sale or conveyance. Any such provision
shall include provision for adjustments that shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 8. The
foregoing provisions shall similarly apply to successive reclassifications or
capital reorganizations of outstanding shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(c) Irrespective of any adjustments or changes in the Warrant Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants, the
Warrant Certificates theretofore and thereafter issued shall, unless the
Corporation shall exercise its option to issue new Warrant Certificates pursuant
to Section 2(c) hereof, continue to express the applicable Warrant Price per
share and the number of shares purchasable thereunder as were expressed in the
Warrant Certificates when the same were originally issued.
(d) After each adjustment of the Warrant Price pursuant to this Section 8,
the Corporation will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Corporation setting forth: (i) the applicable
Warrant Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Corporation shall have elected to adjust the number of Warrants, the number of
Warrants to which the registered holder of each warrant shall then be entitled,
and (iii) a brief statement of the facts accounting for such adjustment. The
Corporation will promptly file such certificate with the Warrant Agent and cause
a brief summary thereof to be sent by ordinary first class mail to each
Registered Holder of Warrants at his last address as it shall appear on the
registry books of the Warrant Agent. No failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the validity thereof. The
affidavit of an officer of the Warrant Agent or the Secretary or an Assistant
Secretary of the Corporation that such notice has been mailed shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
-7-
<PAGE>
(e) For purposes of Section 8(a) and 8(b) hereof, the following provisions
(A) and (B) shall also be applicable;
(A) The number of shares of Common Stock outstanding at any given
time shall include shares of Common Stock owned or held by or for the account of
the Corporation and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a Change of
Shares for purposes of said sections.
(B) No adjustment of the Warrant Price shall be made unless such
adjustment would require an increase or decrease of at least $.01 in such price;
provided that any adjustments which by reason of this clause (B) are not
required to be made shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an increase or decrease of at
least $.01 in the Warrant Price then in effect hereunder.
(f) As used in this Section 8, the term "Common Stock" shall mean and
include the Corporation's Common Stock authorized on the date of the original
issue of the Warrants and shall also include any capital stock of any class of
the Corporation thereafter authorized which shall not be limited to a fixed sum
or percentage in respect of the rights of the holders thereof to participate in
dividends and in the distribution of assets upon the voluntary liquidation,
dissolution or winding up of the Corporation; provided, however, that the shares
issuable upon exercise of the Warrants shall include only shares of such class
designated in the Corporation's Certificate of Incorporation as Common Stock on
the date of the original issue of the Warrants or (i), in the case of any
reclassification, change, consolidation, merger, sale or conveyance of the
character referred to in Section 8(c) hereof, the stock, securities or property
provided for in such section or (ii), in the case of any reclassification or
change in the outstanding shares of Common Stock issuable upon exercise of the
Warrants as a result of a subdivision or combination or consisting of a change
in par value, or from par value to no par value, or from no par value to par
value, such shares of Common Stock as so reclassified or changed.
(g) Any determination as to whether an adjustment in the Warrant Price in
effect hereunder is required pursuant to Section 8, or as to the amount of any
such adjustment, if required, shall be binding upon the holders of the Warrants
and the Corporation if made in good faith by the Board of Directors of the
Corporation.
SECTION 9. Fractional Warrants and Fractional Shares.
-----------------------------------------
(a) If the number of shares of Common Stock purchasable upon the exercise
of each Warrant is adjusted pursuant to Section 8 hereof, the Corporation shall
nevertheless not be required to issue fractions of shares, upon exercise of the
Warrants or otherwise, or to distribute certificates that evidence fractional
shares or Warrants to purchase fractional shares. With respect to any fraction
of a share called for upon any exercise hereof, the Corporation shall pay to the
Registered Holder an amount in cash equal to such fraction multiplied by the
current market value of such fractional share, determined as follows:
-8-
<PAGE>
(1) If the Common Stock is listed on a National Securities Exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ System, the current value shall be the last reported
sale price of the Common Stock on such exchange or system on the last
business day prior to the date of exercise of the Warrant or if no such
sale is made on such day, the average of the closing bid and asked prices
for such day on such exchange or system; or
(2) If Section 9(a)(1) does not apply, the current value shall be the
mean of the last reported bid and asked prices reported by the National
Quotation Bureau, Inc. on the last business day prior to the date of the
exercise of the Warrant; or
(3) If neither Section 9(a)(1) nor Section 9(a)(2) applies, the
current value shall be an amount determined in such reasonable manner as
may be prescribed by the Board of Directors of the Corporation.
SECTION 10. Warrant Holders Not Deemed Stockholders. No holder of
---------------------------------------
Warrants shall, as such, be entitled to vote or to receive dividends or be
deemed the holder of Common Stock that may at any time be issuable upon exercise
of such Warrants for any purpose whatsoever, nor shall anything contained herein
be construed to confer upon the holder of Warrants, as such, any of the rights
of a stockholder of the Corporation or any right to vote for, or receive notice
as a stockholder in respect of, the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issue or
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger or conveyance or otherwise) or any other matter, or
to receive notice of meetings, or to receive dividends or subscription rights,
until such Holder shall have exercised such Warrants and been issued shares of
Common Stock in accordance with the provisions hereof.
SECTION 11. Rights of Action. All rights of action with respect to this
----------------
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Corporation his right to exercise his Warrants for the
purchase of shares of Common Stock in the manner provided in the Warrant
Certificates and this Agreement.
SECTION 12. Agreement of Warrant Holders. Every holder of a Warrant, by
----------------------------
his acceptance thereof, consents and agrees with the Corporation, the Warrant
Agent and every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered the office of the Warrant Agent, duly endorsed or
accompanied a proper instrument of transfer satisfactory to the Warrant Agent
and the Corporation in their sole discretion, together with payment of any
applicable transfer taxes; and
-9-
<PAGE>
(b) The Corporation and the Warrant Agent may deem and treat the Person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Corporation nor the Warrant Agent shall be affected by
any notice or knowledge to the contrary, except as otherwise expressly provided
in Section 7 hereof.
SECTION 13. Cancellation of Warrant Certificates. If the Corporation
------------------------------------
shall purchase or acquire any Warrant or Warrants, the Warrant Certificate or
Warrant Certificates evidencing the same shall thereupon be delivered to the
Warrant Agent and canceled by it and retired. The Warrant Agent shall also
cancel Warrant Certificates following exercise of any or all of the Warrants
represented thereby or delivered to it for transfer, split-up, combination or
exchange.
SECTION 14. Concerning the Warrant Agent. The Warrant Agent acts
----------------------------
hereunder as agent and in a ministerial capacity for the Corporation, and its
duties shall be determined solely by the provisions hereof. The Warrant Agent
shall not, by issuing and delivering Warrant Certificates or by any other act
hereunder be deemed to make any representations as to the validity, value or
authorization of the Warrant Certificates or the Warrants represented thereby or
of any securities or other property delivered upon exercise of any Warrant or
whether any stock issued upon exercise of any Warrant is fully paid and
nonassessable.
The Warrant Agent shall not at any time be under any duty or responsibility
to any holder of Warrant Certificates to make or cause to be made any adjustment
of the Warrant Price provided in this Agreement, or to determine whether any
fact exists which may require any such adjustments, or with respect to the
nature or extent of any such adjustment, when made, or with respect to the
method employed in making the same. It shall not (i) be liable for any recital
or statement of facts contained herein or for any action taken, suffered or
omitted by it in reliance on any Warrant Certificate or other document of
instrument believed by it in good faith to be genuine and to have been signed or
presented by the proper party or parties, except for any action taken, suffered
or omitted by it due to its negligence, willful misconduct or bad faith (ii) be
responsible for any failure on the part of the Corporation to comply with any of
its covenants and obligations contained in this Agreement or in any Warrant
Certificate, or (iii) be liable for any act or omission in connection with this
Agreement except for its own negligence or willful misconduct.
The Warrant Agent may at any time consult with counsel satisfactory to it
and shall incur no liability or responsibility for any action taken, suffered or
omitted by it in good faith in accordance with the opinion or advice of such
counsel.
Any notice, statement, instruction, request, direction, order or demand of
the Corporation shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
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<PAGE>
The Corporation agrees to pay the Warrant Agent reasonable compensation for
its services hereunder and to reimburse it for its reasonable expenses
hereunder; it further agrees to indemnify the Warrant Agent and save it harmless
against any and all losses, expenses and liabilities, including judgments, costs
and counsel fees, for anything done or omitted by the Warrant Agent in the
execution of its duties and powers hereunder except losses, expenses and
liabilities arising as a result of the Warrant Agent's negligence, willful
misconduct or bad faith. In no case will the Warrant Agent be liable for
special, indirect, incidental or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits), even if the Rights Agent
has been advised of the possibility of such loss or damage.
The Warrant Agent may resign its duties and be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of the
Warrant Agent's own negligence or wilful misconduct or bad faith), after giving
30 days, prior written notice to the Corporation. At least 15 days prior to the
date such resignation is to become effective, the Warrant Agent shall cause a
copy of such notice of resignation to be mailed to the Registered Holder of each
Warrant Certificate at the Corporation's expense. Upon such resignation, or any
inability of the Warrant Agent to act as such hereunder, the Corporation shall
appoint a new warrant agent in writing. If the Corporation shall fail to make
such appointment within a period of 15 days after it has been notified in
writing of such resignation by the resigning Warrant Agent, then the Registered
Holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. Any new warrant agent,
whether appointed by the Corporation or by such a court shall be a bank or trust
company having a capital and surplus as shown by its last published report to
its stockholders, of not less than [$100,000,000], or a stock transfer company.
After acceptance in writing of such appointment by the new warrant agent is
received by the Corporation, such new warrant agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named herein as the Warrant Agent, without any further assurance, conveyance,
act or deed; but if for any reason it shall be necessary or expedient to execute
and deliver any further assurance, conveyance, act or deed, the same shall be
done at the expense of the Corporation and shall be legally and validly executed
and delivered by the resigning Warrant Agent. Not later than the effective date
of any such appointment the Corporation shall file notice thereof with the
resigning Warrant Agent and shall forthwith cause a copy of such notice to be
mailed to the Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent may
be converted or merged or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Corporation and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or their
officers or directors, may buy and hold or sell Warrants or other securities of
the Corporation and otherwise deal with the
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<PAGE>
Corporation in the same manner and to the same extent and with like effects as
though it were not Warrant Agent. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Corporation or for any other
legal entity.
SECTION 15. Modification of Agreement. The Warrant Agent and the
-------------------------
Corporation may by supplemental agreement make any changes or corrections in
this Agreement (i) that they shall deem appropriate to cure any ambiguity or to
correct any defective or inconsistent provision or manifest mistake or error
herein contained; or (ii) that they may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Warrant Certificates
provided, however, that this Agreement shall not otherwise be modified,
- --------
supplemented or altered in any respect except with the consent in writing of the
Registered Holders of Warrant Certificates representing not less than 50% of the
Warrants then outstanding; and provided, further, that no change in the number
-----------------
or nature of the securities purchasable upon the exercise of any Warrant, or the
Warrant Price therefor, or the acceleration of the Warrant Expiration Date,
shall be made without the consent in writing of the Registered Holder of the
Warrant Certificate representing such Warrant, other than such changes as are
specifically prescribed or permitted by this Agreement as originally executed.
SECTION 16. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Corporation, at 430 Ferguson Drive, Mountain View, California
94043 Attention: Secretary, or at such other address as may have been furnished
to the Warrant Agent in writing by the Corporation; if to the Warrant Agent, at
[50 California Street, 10th Floor, San Francisco, California 94111].
SECTION 17. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws.
SECTION 18. Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of the Corporation and the Warrant Agent and their
respective successors and assigns, and the holders from time to time of Warrant
Certificates. Nothing in this Agreement is intended or shall be construed to
confer upon any other person any right, remedy or claim, in equity or at law, or
to impose upon any other person any duty, liability or obligation.
SECTION 19. Termination. This Agreement shall terminate at the close of
-----------
business on the Expiration Date of all the Warrants or such earlier date upon
which all Warrants have been exercised, except that the Warrant Agent shall
account to the Corporation for cash held by it and the provisions of Section 14
hereof shall survive such termination.
SECTION 20. Counterparts. This Agreement may be executed in several
------------
counterparts, which taken together shall constitute a single document.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed as of the date first above written.
CATALYTICA, INC.
By:_____________________________________
Ricardo B. Levy, President
CHASEMELLON SHAREHOLDER
SERVICES, L.L.P.
By:_____________________________________
Authorized Officer
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<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) of Catalytica, Inc. for the Registration of
6,635,263 shares of its Common Stock and to the incorporation by reference
therein of our report dated January 28, 1997 with respect to the financial
statements of Catalytica, Inc. included in its Annual Report (Form 10-K/A) for
the year ended December 31, 1996 filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
-------------------------------------
Ernst & Young LLP
San Jose, California
July 30, 1997
